Indiabulls Real Estate 2QFY11: Good traction Operationally:: UBS

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UBS Investment Research
Indiabulls Real Estate
2QFY11: Good traction Operationally
􀂄 2Q Beats UBSe and Consensus; Growth strong on QoQ as well
Revenues grew 21x YoY to Rs3bn vs. UBSe of Rs 1.9bn; with earnings up 4x
YoY to Rs505mn compared to UBSe of Rs228mn. EBITDA grew to Rs812mn vs
UBSe of Rs540mn on back of healthy margins of 27%. Growth was strong on QoQ
basis as well. Good progress on construction across key projects (Panvel, Gurgaon,
Chennai) contributed to this; we expect this trend to continue in 2HFY11.
􀂄 Good traction operationally
1) Strong pre-sales of 1.84msf (vs.0.65msf in 1Q) to generate potential cash flow
of Rs30.9bn – driven by sales promotions of ‘Sky’ (1.05msf); 2) Area under
development grew by 2.9msf to ~15msf; 3) Leasing picked up with 0.11msf leased
in 2Q at IPIT’s Mumbai assets (~2msf of ready inventory); and 4) new NTC mill
land launch, also seeing good responses.
􀂄 Triggers: Sustained pre-sales/leasing recovery, value creation in power sub
We believe sustained pre-sales, leasing recovery in Mumbai office assets along
with improved execution will be key triggers. This apart, increased visibility on
progress of 58.6% power sub (setting up 5400MW); and plans to unlock value
through re-structuring of ownership will drive near-term stock performance, in our
view.
􀂄 Valuation: Maintain Buy rating with PT of Rs235
Our target is at 25% to NAV of Rs315 that ascribes Rs76 to IPIT assets, Rs82 to
the listed power sub, and Rs76 to recently won NTC mill land – all of which
provide a strong valuation support. Further, its de-leveraged b/sheet and other paid
land reserves of ~200msf make it cheap (in rising asset price environment), in our
opinion.