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Real Estate
Potential Result Outperformer: DLF
Potential Result Underperformer: IBREL
Result Expectations – Key Highlights
We expect revenue growth to pick up pace QoQ as well as YoY as most of the
projects launched in 2009 are now expected to start flowing in the revenues.
EBITDA margins are expected to show improvement as price realizations in 2010
have been 10-20% higher than 2009 while construction costs have remained
stable. The focus will likely be on cash flows from operations and pre-sales
volumes in the seasonally strong 3Q. While the pre-sale volumes are expected to
show improvement compared to 2Q for most of the developers, 3Q is unlikely to
be a blockbuster qtr as developers held back new launches in hope of improving
realizations and lesser bandwidth on execution. We do expect cash surplus
leading to lower leverage across developers as execution is expected to pick up
pace post monsoon.
DLF – Sales expected to increase 5% QoQ to Rs24.9bn mostly helped by the
launch of the plotted development in Gurgaon. We expect the reported net profit
to grow by 18% QoQ to Rs4.9bn with improvement in EBITDA margin to 45%
primarily due to higher margin in plotted sales. DLF also soft launched two more
plotted developments in Panchkula and Indore projects while the 2nd phase of the
Gurgaon project is expected in 4Q. We do expect DLF to meet its guidance of
cash surplus of Rs7bn in 3Q, helped by sales of plotted development in Gurgaon.
Unitech – Sales are expected to bounce back in 3Q to Rs8.2bn, a growth of
27% QoQ as execution was impacted in 2Q due to monsoon and shortage of
labour for Commonwealth Games. The net profit is also expected to grow 22%
QoQ to Rs2.12bn, mostly in line with revenue growth. We expect Unitech to
report flattish sales volume and realizations QoQ, as higher prices are expected
to impact volumes in its core Gurgaon market.
HDIL –We expect sales to grow by 10% QoQ to Rs4.1bn helped by higher TDR
sales in the seasonally strong Qtr. We have not factored FSI sale of Goregaon
project for Rs6bn in 3Q. If the transaction is concluded in 3Q the revenue could
be substantially higher in 3Q. Since accounting is done on a "project completion"
method, recognition of revenues and profit tends to be very lumpy and difficult to
predict. We will look for more color on the approvals status for subsequent
phases of the airport rehab project and timeline for relocation to rehab units.
Sobha –We expect Sobha to report a QoQ drop in revenue to Rs3.5bn as 2Q
included Rs1.1bn from sale of land. The reported numbers could be higher if
Sobha manages to conclude further sale of land parcels as they have targeted
Rs2bn from land sales in FY11. The pre-sale volume is expected to grow by 7-
10% to over 0.8mn sq ft as Sobha launched 3 projects in 3Q of over 1mn sq ft.
We also expect the debt to reduce further by Rs500mn from the internal accruals.
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