Godrej Properties 1QF13 result review | TP – Rs 695 | Rating: BUY
Revenue ahead of expectations; margins affected due to cost escalation
Godrej Properties’ (GPL) 1QF13 top line at Rs 2.3bn was ahead of our estimate of Rs1.9bn. Company sold 0.83msf during the quarter with total sales booking value of Rs5.3bn. Considerable portion (43%) of the revenue recognised in P&L was from the recently launched project at Vikhroli – Godrej One. Escalation in cost of construction coupled with high presales in initial period for residential projects affected margins. EBIDTA margins for the quarter stood at 18%. With higher than expected other income, PBT at Rs454mn was inline with our estimates of Rs452mn. Tax rate during the quarter was higher at 43% due to consolidation of loss making subsidiaries. Overall, the performance was considerably better on Y-o-Y basis but lower than the previous quarter.
Net debt equity increased: During the quarter, company paid Rs1.3bn to Godrej & Boyce as a partial payment towards Vikhroli land. Further, company also had cash outflow towards security deposits for new projects and ongoing and new project construction cost. This increased overall net debt to Rs1.7bn from Rs1.5bn in 4QF12 pushing net D/E ratio to 1.2x.
Commercial properties monetisation awaited: Performance of commercial properties continue to remain subdued. During the quarter, company sold 1.7msf for a total sales value of Rs1.7bn. However, barring Godrej One no other properties managed to show impressive absorption. Of the total sales value from commercial projects, Godrej One constituted 64%. While company maintains its strategy to reduce debt by monetising commercial properties, near term visibility seems low.
Project portfolio continues to get stronger: GPL continues to add newer projects to its portfolio. During the quarter, company entered into three projects – luxury hosing project at Alipore, development management agreement for redevelopment project at Byculla and township project at Panvel. Company also entered into an agreement with APG led global investor consortium for a total investment of Rs7.7bn to develop residential projects across India.
New launches – on track: During the quarter, company launched two projects – Godrej Serenity in Mumbai and phase I of Godrej Horizon at Pune. Company is on track to launch 17 projects in F13.
Valuation and recommendation: While the company is facing some short term hurdles, we believe it is gearing up for a long term growth. Monetisation of commercial projects will remain key trigger for the company. We maintain out BUY rating on GPL with a price target of Rs695.
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