A strong set; timing of launches a key monitorable
Revenue for Suraj Estate Developers (SURAJEST) grew 31% YoY to INR134cr in Q1FY25 on a ramp up in execution, which led to a higher area hitting its sales recognition milestone. EBITDA grew 35% YoY to INR63cr, with a 171bp expansion in margin to 47.3% on the back of a better product mix and operating leverage benefits. PAT grew 107% YoY to INR30cr aided by lower (19%) interest cost. In Q1FY25, it re-financed the last tranche of its high-cost NCDs (INR32cr). The management expects rates to stay in the 13–13.5% range and has guided at an interest cost of INR65–70cr for FY25 (FY24: INR139cr). Pre-sales grew 5% YoY to INR140cr, led by a 13% growth in average realisation. Collections were muted at INR72cr.
In FY25, it intends to launch seven projects with a GDV of INR1,150cr (residential/commercial: INR675cr/INR450cr), which will help it achieve its guided pre-sales of INR850cr (residential/ commercial: INR650cr/INR200cr). As of June, it had an inventory of ~INR500cr (~93,000sq. ft.) in its ongoing projects and a pipeline of ~9lk sq. ft., with a GDV of ~INR5,100cr. We expect ongoing and upcoming projects to generate a gross/net cash flow of INR7,901cr/INR4,148cr over FY25–32. We discount cash flows to FY26 to arrive at a NAV of INR2,736cr. We revise our premium to 50% from 40% earlier to account for lower-than-expected finance cost. We maintain ‘BUY’ with a revised TP of INR935 (1.5x FY26E NAV) from INR757 earlier.
Strong all-round performance on premiumisation, better execution, and lower interest cost
Led by a ramp up in execution, revenue grew 31% YoY to INR134cr (it follows the percentage completion method of accounting). EBITDA grew 35% YoY to INR63cr, with margin expanding by 171bp on the back of a better product mix (63.6% of revenue accrued from luxury units) and cost optimisation (other expenses fell 12%). PAT grew 107% YoY to INR30cr on lower interest costs. Revenue/EBITDA/PAT grew 33%/18%/55% QoQ. Bookings grew a steady 5% YoY to INR140cr (all in the residential segment). Volume dipped by 7% YoY to 27,431sq. ft. due to a lack of launches. Average realisation improved by 13% YoY to INR51,116/sq. ft. due to a better product mix. Sequentially, presales grew 15% on a 20% growth in volume.
Project pipeline stable, launches worth INR1,150cr to drive pre-sales in FY25
As of June-end, it had an inventory of ~93,000sq. ft. (GDV: ~INR500cr) in ongoing projects with plans to launch ~9lk sq. ft. (GDV: ~INR5,100cr) till FY27. Of this, launches of ~INR1,150cr (residential/commercial: INR675cr/INR475cr) are planned in FY25. Driven by launches, it expects presales of INR850cr (residential/commercial: INR650cr/ INR200cr) in FY25.
Re-financing of high-cost debt to drive ~50% savings in interest cost
Subsidiary Iconic Property Developers had issued high-cost NCDs worth INR192cr to India Housing Fund to acquire land. Of this, it repaid INR160cr using the IPO proceeds and internal accruals. In Q1FY25, it re-financed INR32cr. It paid a redemption premium of INR18cr, of which INR7cr was recognised in Q4FY24 and the rest in Q1FY25. It expects interest cost to range between 13% and 13.5%. Interest cost for FY25 (includes a redemption premium of INR11cr) is pegged at INR65–70cr (FY24: INR139cr).
Expect pre-sales/revenue/EBITDA/PAT CAGR of 53%/53%/50%/101% over FY24–27E
Over FY24–27, we see 53% CAGR in pre-sales at INR1,720cr. We expect inventory and the current project pipeline to generate a gross/net cash flow of INR7,901cr/INR4,148cr over FY25–32. We see revenue growing in line with pre-sales growth. EBITDA margin is expected to settle at 52–53%, with 49.6% EBITDA CAGR over FY24–27 at INR780cr. We expect 101% PAT CAGR over FY24–27 to INR548cr on falling interest cost.
Maintain ‘BUY’ with a revised TP of INR935
Owing to: i) a robust project lineup and a healthy launch pipeline, ii) its leadership position in the redevelopment segment in South Central Mumbai, iii) strong cost advantage and a proven track record in redeveloping 33(7) projects, iv) a huge addressable market, and v) a healthy Balance Sheet with predictable cash flows, we are optimistic on the growth story of SURAJEST. We maintain ‘BUY’ with a revised TP of INR935, valuing the company at 1.5x FY26E NAV.
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