A strong set; timing of launches a key monitorable
Revenue for Suraj Estate Developers (SURAJEST) grew 60% YoY to INR170cr on higher average residential prices. EBITDA fell 34% YoY to INR46cr, with margin contracting by ~39pp YoY to 26.97% due to shift in the product mix (~60% of revenue generated from lower margin value luxury projects) and a one-time hit of INR15cr. PAT surged by 21% YoY (down 37% QoQ) to INR20cr on lower interest cost led by de-leveraging and re-financing of high-cost debt. Pre-sales fell 29% YoY to INR102cr. There was a 56% YoY dip in volume growth due to no new project launches and limited unsold inventory. Realisation grew a significant 61% YoY to INR64,711/sq. ft. on strong pricing growth in residential projects and a better product mix. Collections grew 24% YoY to INR84cr on steady construction and collection from commercial project CCIL.
In Q1FY26, SURAJEST aims to launch three projects (two residential and one commercial), with a combined GDV of INR1,600cr (residential/commercial: INR400cr/INR1,200cr). We expect ongoing and upcoming projects to generate a gross/net cash flow of INR7,117cr/INR3,771cr over FY25–32. We discount cash flows to FY26 to arrive at a NAV of INR2,934cr. We reduce our TP to INR661 from INR992, adjusting the NAV premium to 1x from 1.5x. Maintain ‘BUY’.
Strong revenue growth; margins impacted by value-luxury mix
Revenue grew 60% YoY and 56% QoQ to INR170cr (it follows the percentage completion method of accounting). EBITDA margin fell as ~62% of revenue accrued from value-luxury projects which have lower margin and higher construction and employee cost.
Luxury demand drives higher realisation despite a decline in pre-sales
Residential pre-sales fell 29% YoY to INR102cr whereas commercial stood at INR5cr. Residential volume fell 56% YoY to 15,736 sq. ft. as there was no new launches, less unsold inventory, and delay in some projects to Q4FY25 and Q1FY26. Commercial volume stood at 920 sq. ft. Average realisation in the residential segment improved by 61% YoY to INR64,711 on higher prices and as most pre-sales were from the luxury vertical. Average realisation in the commercial segment stood at INR57,609. Sequentially, residential pre-sales fell 5% on a 29% decline in volume.
Expanding GDV and a robust launch pipeline set to drive growth in FY26
As of December-end, SURAJEST had an inventory of ~50,000sq. ft. (GDV: ~INR300cr) in ongoing projects. It plans to launch ~9lk sq. ft. (GDV: ~INR5,000cr) by FY27. It postponed its Tulsi Pipe Road commercial launch to Q1FY26 to maximum value, expand GDV to ~INR1,200cr from ~INR475cr through adjacent land acquisition. This and the delayed residential projects will launch in Q1FY26. Despite delayed launches, the management sees pre-sales of INR500–525cr by FY25-end.
Margin recovery on track; strong pipeline and luxury demand to drive growth
While higher contribution from lower-margin value-luxury projects and a one-time litigation settlement cost of INR15cr hit margin in Q3FY25, the management expects it to normalise from Q4 on sale of luxury units, ranging between 40% and 45% depending on revenue recognition and product mix. Strong launches and robust luxury demand should drive healthy cash flows and margin expansion in coming quarters. Over FY24–27, we estimate 51% CAGR in pre-sales to INR1,663cr. We see EBITDA margin settling at 52–53%, with 50.4% EBITDA CAGR over FY24–27 (INR791cr). We forecast 101.9% PAT CAGR over FY24–27 to INR555cr on falling interest cost.
Maintain ‘BUY’ with a revised TP of INR661
Owing to: i) a robust project lineup, ii) leadership in redevelopment projects 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 about SURAJEST’s growth story. We maintain ‘BUY’ but revise our TP of INR661, valuing the stock at 1x FY26E NAV.
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