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Anant Raj Industries (ARCP IN) Rating:1
2Q FY11 results – in line with expectations
What has changed?
Anant Raj Industries’s revenue increased by 28% QoQ to Rs1,329m for 2Q
FY11, but its net profit rose by 4% QoQ to Rs479m due to lower gross margins
and higher staff costs sequentially.
Impact
Revenue rose by 28% QoQ for 2Q FY11: The revenue increase was driven
by: 1) the sale of the remaining 22 units in Kapashera in Delhi (60,000 sq ft)
and 2) the sale of housing in Manesar (316 flats, 0.5m sq ft). The sale rate was
Rs2,700/sq ft.
The EBITDA margin declined from 55% for 1Q FY11 to 47% for 2Q
FY11: The quarter-on-quarter EBITDA-margin decline was due primarily to
lower margins for the homes on the Manesar land, compared with the relatively
higher margin for the Kapashera (Delhi) property that was sold in 1Q FY11.
Updates on Bhagwan Dass Road and Hauz Khas property: The Bhagwan
Dass Road property in Delhi has been transferred completely to the company
and is expected to be launched in FY12. Anant Raj Industries has also won the
court case for the Hauz Khas property.
Valuation
We maintain our six-month target price of Rs159, based on a target NAV
multiple of 1x on our end-FY12 NAV forecast.
Catalysts and action
We maintain our 1 (Buy) rating. We believe our call is supported by: 1) the
company’s well-located land bank, and 2) India’s improving economy,
implying a pick-up in property demand.
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