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India Equity Research Reports, IPO and Stock News
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Proxy to most resilient Mumbai property market: HDIL is India's
third largest real estate developer by market capitalisation, and
is one of the few developers that have met their project timelines
amidst the recent business downcycle, highlighting its strong
execution ability. HDIL, with a land bank of195mn sq ft, is a
direct play on the resilient Mumbai property market (36%,
including TDR and FSI sales, and the Mumbai Metropolitan
Region (MMR) - 43%). Mumbai contributes a significant 70% to
HDIL's NAV, more than any other major listed real estate company
operating in India's two metros, Mumbai and Delhi.
Look beyond MIAL: HDIL have already generated 11mn sq ft
from the project so far despite the more than one year delay in
shifting the families in Phase 1. Further, the Maharashtra
government is likely to hike FSI from 1.0x to 1.33x in the suburbs,
which will affect the TDR prices. Hence, we have factored in
lower TDR price of `2,400/sf. (i.e. 20% discount to current levels
of `3,000/sf) for arriving at our target price, and do not expect
negative impact incrementally. We have assumed 4.5msf of TDR
sale (i.e. 30% drop in TDR sales from FY2010) in FY2011 and
FY2012 to factor in the hike in FSI. It should be noted here that
a 10% decline in TDR prices would adversely impact our NAV by
a mere 3% and target price by 2.3%. Given the delay/uncertainty
in shifting of families, we have excluded10mn sq ft (potential 65
acres), which HDIL is expected to get at the airport vicinity as it
rehabilitates 85,000 families. Overall, we expect the share of
TDR sales in the revenue mix to fall from 60% in FY2011 to 30%
in FY2012.
Rewarding new launches: HDIL's recent launch of a mid -ncome
housing project in Palghar has received strong response with the
company selling 30% of the volumes in the first 3 days of launch.
In 2QFY2011, HDIL launched the Whispering Towers - Phase I,
Mulund and sold >40% at an avg. price of `8,000/sf. We
believe the company's recent launches have been successful on
account of being launched at 10-20% discount to the
prevailing market prices. The company has been able to
pre-sell 75% of its residential projects (7msf) launched since
FY2009, thereby providing `5,000cr of revenue visibility over
FY2010-12E.
Outlook and valuation: The HDIL stock underperformed in the
last cyclical downturn primarily due to its overdependence on
TDR sales. While we remain negative on the Mumbai region, we
believe that HDIL could outperform on the back of increased
land sales, successful new launches, which would improve
its balance sheet liquidity (net D:E ratio of 0.32x for 2QFY2011),
and less dependence on TDR sales. However, we have
assigned 30% discount to our one-year forward NAV, assumed
TDR price of `2,400/sq ft and excluded 10mn sq ft of the MIAL
project to factor in the delays in execution, hike in FSI and weak
MMR property market outlook. At `137, HDIL is trading at 60%
discount to our 1-year forward NAV of `347 and at 0.5x FY2012E
P/BV. We maintain a Buy on the stock, with a Target Price of
`243 (30% discount to our NAV).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Proxy to most resilient Mumbai property market: HDIL is India's
third largest real estate developer by market capitalisation, and
is one of the few developers that have met their project timelines
amidst the recent business downcycle, highlighting its strong
execution ability. HDIL, with a land bank of195mn sq ft, is a
direct play on the resilient Mumbai property market (36%,
including TDR and FSI sales, and the Mumbai Metropolitan
Region (MMR) - 43%). Mumbai contributes a significant 70% to
HDIL's NAV, more than any other major listed real estate company
operating in India's two metros, Mumbai and Delhi.
Look beyond MIAL: HDIL have already generated 11mn sq ft
from the project so far despite the more than one year delay in
shifting the families in Phase 1. Further, the Maharashtra
government is likely to hike FSI from 1.0x to 1.33x in the suburbs,
which will affect the TDR prices. Hence, we have factored in
lower TDR price of `2,400/sf. (i.e. 20% discount to current levels
of `3,000/sf) for arriving at our target price, and do not expect
negative impact incrementally. We have assumed 4.5msf of TDR
sale (i.e. 30% drop in TDR sales from FY2010) in FY2011 and
FY2012 to factor in the hike in FSI. It should be noted here that
a 10% decline in TDR prices would adversely impact our NAV by
a mere 3% and target price by 2.3%. Given the delay/uncertainty
in shifting of families, we have excluded10mn sq ft (potential 65
acres), which HDIL is expected to get at the airport vicinity as it
rehabilitates 85,000 families. Overall, we expect the share of
TDR sales in the revenue mix to fall from 60% in FY2011 to 30%
in FY2012.
Rewarding new launches: HDIL's recent launch of a mid -ncome
housing project in Palghar has received strong response with the
company selling 30% of the volumes in the first 3 days of launch.
In 2QFY2011, HDIL launched the Whispering Towers - Phase I,
Mulund and sold >40% at an avg. price of `8,000/sf. We
believe the company's recent launches have been successful on
account of being launched at 10-20% discount to the
prevailing market prices. The company has been able to
pre-sell 75% of its residential projects (7msf) launched since
FY2009, thereby providing `5,000cr of revenue visibility over
FY2010-12E.
Outlook and valuation: The HDIL stock underperformed in the
last cyclical downturn primarily due to its overdependence on
TDR sales. While we remain negative on the Mumbai region, we
believe that HDIL could outperform on the back of increased
land sales, successful new launches, which would improve
its balance sheet liquidity (net D:E ratio of 0.32x for 2QFY2011),
and less dependence on TDR sales. However, we have
assigned 30% discount to our one-year forward NAV, assumed
TDR price of `2,400/sq ft and excluded 10mn sq ft of the MIAL
project to factor in the delays in execution, hike in FSI and weak
MMR property market outlook. At `137, HDIL is trading at 60%
discount to our 1-year forward NAV of `347 and at 0.5x FY2012E
P/BV. We maintain a Buy on the stock, with a Target Price of
`243 (30% discount to our NAV).
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