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Revenues and PAT ahead of our estimates
Anant Raj Industries (Anant Raj) reported revenues of 1,244 mn, ahead of our
estimate of INR 720 mn, mainly on account of higher-than-expected bookings at
its Madelia residential project in Manesar, located in National Capital Region
(NCR). Revenue break-up for the quarter consists of ~INR 930 mn from Manesar
(~40% PoCM) and rental income of INR 198 mn (our estimate: INR 195 mn).
With Anant Raj achieving higher-than expected realisation from Manesar at ~INR
3,300/sf (our expectation of INR 3,000/sf), reported PAT of INR 502 mn was
above our estimate of INR 205 mn.
New residential launches on the anvil in CY11
Anant Raj has been actively pursuing land acquisitions in CY10 and expects to
launch two more residential projects over the next six months at Sec-91
Gurgaon (15.5 acre land parcel acquired for ~INR 0.9 bn, with saleable area of
1.2 msf) and Neemrana in Rajasthan (18 acre land parcel acquired for ~INR 130
mn with saleable area of ~2 msf). We have factored these launches in our
estimates in Q1FY12. Launch of these projects, along with Hauz Khas, Delhi,
may act as positive triggers for the stock.
Rental revenues to post growth in FY12
We estimate Anant Raj to generate ~INR 0.8 bn of rental income in FY11 and
expect this to grow to ~INR 1.2 bn in FY12, primarily driven by launch of Kirti
Nagar mall project (~50% of 0.75 msf leased currently), and fresh leasing at
Manesar SEZ (0.3 msf yielding rentals and advanced stages of negotiation on for
an additional ~0.2 msf) and Tricolor (Delhi) and Hilton (Manesar) hotels.
Additionally, phase I of Rai SEZ is expected to be completed in H2CY11.
Outlook and valuation: Attractive; maintain ‘BUY’
We have revised our NAV estimate on FY12 basis to INR 218/share (INR
242/share earlier), factoring in higher cost of equity and increased interest costs.
We have not factored in the launch of Hauz Khas and Bhagwandas Road projects
in Delhi, and have also assumed delays in leasing of IT Park at Manesar and Rai
SEZ, Haryana. We maintain ‘BUY/Sector Outperformer’ recommendation/
rating on the stock.
Company Description
ARIL is the flagship company of the Anant Raj Group. The group began operations in
1969 and is among the oldest and one of the most experienced development and
construction companies in the NCR. It has over three decades of experience in
infrastructure development and construction, and so far, it has developed and
constructed 11.5 mn sq ft. It is also one of the leading ceramic tiles production
companies in India with a plant at Rewari (Haryana).
Investment Rationale
Huge land bank at prime locations in NCR drives value
Anant Raj Industries (ARIL) has access to a high-quality land bank of over 900 acres,
either solely or through its subsidiaries or by way of joint developments. This translates
into total developable area of ~88 mn sq ft (ARIL’s share is 70 mn sq ft). Over 90% of
the land is within NCR, with ~446 acres in Delhi. We believe possession of a large land
bank at prime locations is a significant value driver for ARIL, differentiating the company
from other North India-based developers.
Strong cash flows due to annuities
ARIL is developing a portfolio of leased assets on which it will earn consistent revenues
on an annuity basis. While this strategy is capital intensive, ARIL has regularly monetised
its assets over the past three years, keeping its balance sheet light. The company is
currently generating annualized rentals of ~ INR 0.7 bn, which is expected to increase to
INR 0.8 bn by FY11E and INR 1.2 bn by FY12E.
Key Risks
Regional concentration
Since most of the company’s land bank is based in NCR, it faces strong regional risk. Any
significant correction in property prices in that region or any adverse change in
government policies in NCR will hurt profitability and valuations of ARIL.
High exposure to commercial and IT/SEZ segments
Nearly 60% of the company’s land bank comprises commercial and IT/SEZ development.
These segments have been the worst hit during the recent downturn. In case there is
delay in recovery in these segments, will adversely impact valuations of the company.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Revenues and PAT ahead of our estimates
Anant Raj Industries (Anant Raj) reported revenues of 1,244 mn, ahead of our
estimate of INR 720 mn, mainly on account of higher-than-expected bookings at
its Madelia residential project in Manesar, located in National Capital Region
(NCR). Revenue break-up for the quarter consists of ~INR 930 mn from Manesar
(~40% PoCM) and rental income of INR 198 mn (our estimate: INR 195 mn).
With Anant Raj achieving higher-than expected realisation from Manesar at ~INR
3,300/sf (our expectation of INR 3,000/sf), reported PAT of INR 502 mn was
above our estimate of INR 205 mn.
New residential launches on the anvil in CY11
Anant Raj has been actively pursuing land acquisitions in CY10 and expects to
launch two more residential projects over the next six months at Sec-91
Gurgaon (15.5 acre land parcel acquired for ~INR 0.9 bn, with saleable area of
1.2 msf) and Neemrana in Rajasthan (18 acre land parcel acquired for ~INR 130
mn with saleable area of ~2 msf). We have factored these launches in our
estimates in Q1FY12. Launch of these projects, along with Hauz Khas, Delhi,
may act as positive triggers for the stock.
Rental revenues to post growth in FY12
We estimate Anant Raj to generate ~INR 0.8 bn of rental income in FY11 and
expect this to grow to ~INR 1.2 bn in FY12, primarily driven by launch of Kirti
Nagar mall project (~50% of 0.75 msf leased currently), and fresh leasing at
Manesar SEZ (0.3 msf yielding rentals and advanced stages of negotiation on for
an additional ~0.2 msf) and Tricolor (Delhi) and Hilton (Manesar) hotels.
Additionally, phase I of Rai SEZ is expected to be completed in H2CY11.
Outlook and valuation: Attractive; maintain ‘BUY’
We have revised our NAV estimate on FY12 basis to INR 218/share (INR
242/share earlier), factoring in higher cost of equity and increased interest costs.
We have not factored in the launch of Hauz Khas and Bhagwandas Road projects
in Delhi, and have also assumed delays in leasing of IT Park at Manesar and Rai
SEZ, Haryana. We maintain ‘BUY/Sector Outperformer’ recommendation/
rating on the stock.
Company Description
ARIL is the flagship company of the Anant Raj Group. The group began operations in
1969 and is among the oldest and one of the most experienced development and
construction companies in the NCR. It has over three decades of experience in
infrastructure development and construction, and so far, it has developed and
constructed 11.5 mn sq ft. It is also one of the leading ceramic tiles production
companies in India with a plant at Rewari (Haryana).
Investment Rationale
Huge land bank at prime locations in NCR drives value
Anant Raj Industries (ARIL) has access to a high-quality land bank of over 900 acres,
either solely or through its subsidiaries or by way of joint developments. This translates
into total developable area of ~88 mn sq ft (ARIL’s share is 70 mn sq ft). Over 90% of
the land is within NCR, with ~446 acres in Delhi. We believe possession of a large land
bank at prime locations is a significant value driver for ARIL, differentiating the company
from other North India-based developers.
Strong cash flows due to annuities
ARIL is developing a portfolio of leased assets on which it will earn consistent revenues
on an annuity basis. While this strategy is capital intensive, ARIL has regularly monetised
its assets over the past three years, keeping its balance sheet light. The company is
currently generating annualized rentals of ~ INR 0.7 bn, which is expected to increase to
INR 0.8 bn by FY11E and INR 1.2 bn by FY12E.
Key Risks
Regional concentration
Since most of the company’s land bank is based in NCR, it faces strong regional risk. Any
significant correction in property prices in that region or any adverse change in
government policies in NCR will hurt profitability and valuations of ARIL.
High exposure to commercial and IT/SEZ segments
Nearly 60% of the company’s land bank comprises commercial and IT/SEZ development.
These segments have been the worst hit during the recent downturn. In case there is
delay in recovery in these segments, will adversely impact valuations of the company.
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