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Housing Development & Infrastructure (HDIL)
Property
TDR prices drive a good quarter. HDIL’s 2QFY11 results reflect a stronger-thanexpected
pricing environment for TDRs and high-margin FSI sale while TDR sale volumes
were lower than expected due to captive use. Revenues are up 5% yoy while PAT is up
44% yoy. HDIL has drawn up aggressive growth plans which we have not yet factored
into our NAV calculations pending further clarity on costs and timelines. Retain ADD
with target price of Rs310.
Margin beat overshadows lower-than-expected revenues
HDIL reported 2QFY11 revenues of Rs3.7 bn (+5% yoy, -17% qoq) versus our estimate of Rs4.1
bn. EBITDA margins at 63.7% (+1,290 bps yoy and +440 bps qoq) were substantially better than
our expectation of 45%. PAT was at Rs2.1 bn (+44% yoy, -9% qoq) versus our estimate of Rs1.4
bn. Revenues were lower than estimated due to lower TDR sales of 1.1 mn sq. ft in 1QFY11
(versus 1.5 mn in 4QFY10 and 1.8 mn in 1QFY10) which was partially made up by higher TDR
prices of around Rs3,000/sq. ft versus our estimate of Rs2,400/sq. ft. FSI sales were lower than
expected at approx. Rs700 mn but HDIL has signed an MoU for FSI sale of approx. Rs6.5 bn, which
will flow through to revenues in 3QFY11E.
Draws up aggressive expansion plans
While the focus shifts to execution for the current ongoing portfolio, HDIL has drawn up
aggressive expansion plans which include (1) 27 mn sq. ft of forthcoming residential projects, (2)
five hospitality projects and (3) planned projects that include Motilal Nagar with a potential 10 mn
sq. ft and Novinon property of 13 mn sq. ft.
Retain ADD with target price of Rs310
We adjust our NAV and financial estimates for QIP placement and further issuance of warrants
during the quarter. We have not added any of the new potential projects announced by HDIL
(Motilal Nagar is the most prominent) pending clarity on costs and timelines but note that HDIL’s
presence in the Mumbai market gives it growth opportunities to accrue NAV. We retain ADD
rating with a PT of Rs310 which is based on a 10% discount to our revised NAV. We assign a
discount of 10% on account of riskier nature of slum rehabilitation business. Key upside risks to
NAV include clarity on Motilal Nagar project, better TDR prices and lower construction costs.
Downside risks include lower residential demand due to higher interest rates/selling prices and
leasing risk for its commercial properties.
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