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Orbit Corporation
Conference call update – All’s well; maintain Buy
Maintain Buy. Orbit’s conference call updated 2QFY11 numbers
and current market dynamics. As per the Special Township Act, its
Mandwah project is likely to obtain 1 FSI and area to rise to 11m sqft
(our assumption: 3.4m sqft). The new Coastal Regulation Zone
(CRZ) policy (notification likely in Dec ’10) is also a positive for most
of its projects. We expect 2HFY11 to see better cash receivables than
1H. We maintain Buy with Sep ’11e price target of `181/share.
Macro changes largely positive. Key positives of policy changes
are removal of curbs on development in CRZ-2, likely to be cleared
for slum rehab and redevelopment projects; Orbit would benefit
from this. Recent housing/home loan-related events should have
minimal impact.
Operations update. The execution slowdown was attributed to the
rains; management reiterated its intent to raise construction spend to
`1.8-2bn for remaining fiscal, along with ~`0.7bn for acquisitions. It
acquired a project in the Napean Sea Road (NSR) area (details
awaited) while moving ahead in the NSR road-block project.
2HFY11 to be positive. According to the 2Q investor release,
`12.3bn are receivables from sales till Sep ’10. Management guided
for higher receivables from 3Q, mainly due to construction ahead
(refer our report ‘Launches and sales continue; Mandhwa launched;
Buy’ dated 3 Nov ’10). While Orbit expects to outpace 1H sales, we
believe it will witness at least ~0.2m sqft sales in 2HFY11e.
Valuation. We maintain our NAV-based Sep ’11e target of `181. At
CMP, the stock trades attractively below its Mar ’11e BV, at 0.7x.
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