Credit Suisse-- Real Estate:: Consensus estimates scanner: Further downgrades yet to come?

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India Property Sector ------------------------------------------------------------------------------------------
Consensus estimates scanner: Further downgrades yet to come?


Abhishek Bansal / Research Analyst / 91 22 6777 3968 / abhishek.bansal@credit-suisse.com
● Consensus FY11 EPS estimates have seen continuous
downgrades for the property sector, as DLF and Unitech’s FY11
EPS estimates have been cut 30% and 31%, respectively, since
the beginning of FY11. More recently, DLF’s FY11/FY12E
consensus earnings have also been cut by 11%/18% over the
past one month.
● Consensus still appears bullish on FY12 growth for developers
despite estimates being cut by average 23% for FY12. Current
consensus estimates still imply average 42% growth for FY12
earnings, which we believe is quite aggressive.
● FY12 growth expectations for  most developers have not seen
meaningful decline (except HDIL), despite regular earnings
downgrades. We expect further downgrades for FY12 to occur
and growth expectations to moderate once we enter FY12.
● For DLF, we expect 6% earnings decline in FY12 versus
consensus’ estimate of 28% growth. We see significant downside
risk to consensus estimates and expect FY12 downgrades to
materialise after 4Q FY11. DLF remains our top
UNDERPERFORM in the sector.
Consensus FY11 EPS estimates have seen continuous downgrades
for Indian property stocks since the beginning of FY11. DLF and
Unitech’s FY11 EPS estimates have been cut by 30% and 31%,
respectively, whereas IBREL and HDIL’s FY11 EPS estimates have
been revised down by 19% and 3%, respectively. Sobha, on the other
hand, has seen only a 1% cut since April 2010; however, its earnings

have been cut by 14% from its peak estimate in August 2010. More
recently, DLF’s FY11E and FY12E consensus earnings have been cut
by 11% and 18%, respectively, over the past one month, primarily led
by disappointing 3Q FY11 results.
FY11 EPS expected to see further downside
Compared with 9M FY11 performance delivered by developers,
consensus estimates imply DLF and Unitech’s 4QFY11 earnings to
contribute 34% and 47%, respectively, to full-year FY11 earnings,
which we believe is quite aggressive.


Consensus is still bullish on FY12 growth
Consensus has cut its estimates by average 17% and 23% for FY11
and FY12, respectively. However, the current consensus estimates
still imply average 42% growth for FY12 (versus CS estimate of 33%).
Barring HDIL, for which FY12 EPS growth expectation has come
down from 74% as of April 2010 to 37% currently, FY12 growth
expectations for most developers have not seen meaningful decline,
despite regular earnings downgrades. We expect further downgrades
for FY12 and growth expectations to moderate once we enter FY12
and when the focus actually shifts from FY11 to FY12.


Maintain UNDERPERFORM on DLF
For DLF, we forecast 6% earnings decline in FY12 against consensus’
estimate of 28% growth. We see significant downside risk to
consensus estimates and expect FY12 downgrades to materialise
after 4Q FY11. DLF remains our top UNDERPERFORM in the sector.