Hi Sai,
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7-8 is the complete monetization timeline not the project launch timeline
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A rising cycle for the next 7 yrs will benefit players who have the projects/JDA/landbank in place. Its also good that beyond 7yrs cycle will turn down and smart developers can deploy cash in accumulating projects for future upturn in cycle.
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You assume zero capital appreciation over the next 7 yrs while the cycle is turning up…a very very conservative 25% appreciation in 7yrs in price can be easily expected (although we know the price appreciation can be a lot higher than that)…in which case future cash flows are 30,000cr
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You ignore any future project acquisitions and as a consequence you ascribe zero terminal value to the company. Past track record of 20 yrs shows management has repeatedly recycled and redeployed cash flows at high IRR( much greater than 18%-20%)
Even if we ignore point no.4 above ( which is wrong as it implies that the company shuts down after 8 yrs becoz it cannot generate new business at desired IRRs of >18% as in the past 2 decades), at current MCap of 6150cr, with same tax rate of 25%, pre-tax cash flow of 30,000cr at same time interval as you assume above, IRR works out to be ~26%…Or in other words, if you use a discount rate of ~26%, you would get the NPV equal to today’s Mcap of 6,150…
26% return!!! ( with zero terminal value assumption !!!)
Given the above, I feel Sunteck is a great bargain…
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