Anant Raj Industries (CMP: Rs.149/ TP: Rs.178/ Upside: 19%)
There had been various litigation surrounding Huaz khas project resulting in delay
of launch which has been sorted out. The management has indicated that the
project is back on track and would be launched soon after Diwali. The said
property is of 0.27mn sq ft and going rates in vicinity is in range of
Rs25,000-30,000/sq. ft. We expect this project to contribute Rs400cr of profit over
FY2011-13E i.e 30% of our profit estimates.
We believe, the Indian Office sector is in the recovery phase of the property cycle.
We have begun to see an improvement in the absorption of new supply in 1H
2010 in most key metros. Recent trends in the top seven cities of India indicate that
absorption levels have improved significantly (vis-à-vis prior years), and in a few
cases they have exceeded the new supply by 1.5x. NCR, Pune and Chennai have
shown the maximum improvement. Anant Raj Industries (ARIL) has already
constructed some 3mn sq. ft. of ready leasable assets in the NCR region. The
company currently has two projects (retail mall of 0.75mn sq. ft. in Delhi and IT
Park of 1.1mn sq. ft. in Manesar), which we believe will start generating rental
income from FY2011E itself. Further, ARIL has five operational hotels, most of
which are located in Delhi.
ARIL remains our top pick in the real estate sector, given a strong balance sheet,
inexpensive valuations (trades at 1.2x FY2011E P/BV) and generating
approximately 54% of its GAV from Office and Retail sectors which are witnessing
strong traction. The stock is trading at a discount of 29% to our one year forward
NAV of Rs209. Hence we maintain a Buy on stock with a Target Price of Rs178
(15% discount to our one-year forward NAV).
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