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Housing Development and
Infrastructure Ltd. (HDIL)
▼Neutral Previous: Overweight HDIL.BO, HDIL IN
Airport Rehab- to be or not to be? Removing the "uncertainty value"
• Downgrade to Neutral; what’s changed in the business: HDIL has derated severely from Oct10 levels (down 52%) driven largely by resettlement concerns on airport rehabilitation project and some derating in the overall macro environment (interest rates/liquidity/politics). MIAL rehab project viability has come under scrutiny given the almost year-long delay in resettlement. A change in
the local government in Maharashtra (in Nov-10) hasn’t helped either.
Airport at the moment is more like an option on the stock, in our view.
W believe if it happens the value accretion for HDIL could be immense
(Rs130/share additional), and if not, then a large part of the de-rating is
probably justified. Incrementally, the main catalyst for stock re rating, in
our view, would be an improvement in visibility on the resettlement of
the initial set of families. Till such time, we remove the airport project
from our numbers. HDIL’s suburban Mumbai and middle income
launches however, are doing well (Rs 43B pre-sales in the last 24
months). We believe the stock is cheap on valuations; however,
uncertainty around the airport project results in us downgrading to
Neutral with a new Mar12 SOTP-based PT of Rs 160 (vs. Rs330).
• 3QF11 results- PAT beats estimates but no change in debt – HDIL
reported adjusted net income of Rs2.6B (+20% Q/Q, +58% Y/Y), ahead of
our estimate of Rs2.2B. Earnings beat was on account of higher TDR
volumes (1.25msf at Rs.3100 psf) and lower tax rates (6% vs. 15% in
1HFY11). Gross debt (at Rs41B) did not change during the quarter as the
QIP funds were largely deployed in new land acquisitions (Rs13B). The
company has acquired rights on a project consisting of 23K families in
Malad (Suburban Mumbai). This is one of the largest SRS project outside of
the airport.
• Our earnings estimates for FY11/12 remain largely unchanged as the
positive impact of shift in accounting policy effective Apr-11 to POCM (vs.
completed project method) is offset by slower TDR sales given lower
visibility on generation in FY12/13. Key risks are 1) Upside- Visibility on
airport resettlement 2) Downside- Further slowdown in transaction volumes
in Mumbai beyond what we have modeled (1.6 msf for FY12).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Housing Development and
Infrastructure Ltd. (HDIL)
▼Neutral Previous: Overweight HDIL.BO, HDIL IN
Airport Rehab- to be or not to be? Removing the "uncertainty value"
• Downgrade to Neutral; what’s changed in the business: HDIL has derated severely from Oct10 levels (down 52%) driven largely by resettlement concerns on airport rehabilitation project and some derating in the overall macro environment (interest rates/liquidity/politics). MIAL rehab project viability has come under scrutiny given the almost year-long delay in resettlement. A change in
the local government in Maharashtra (in Nov-10) hasn’t helped either.
Airport at the moment is more like an option on the stock, in our view.
W believe if it happens the value accretion for HDIL could be immense
(Rs130/share additional), and if not, then a large part of the de-rating is
probably justified. Incrementally, the main catalyst for stock re rating, in
our view, would be an improvement in visibility on the resettlement of
the initial set of families. Till such time, we remove the airport project
from our numbers. HDIL’s suburban Mumbai and middle income
launches however, are doing well (Rs 43B pre-sales in the last 24
months). We believe the stock is cheap on valuations; however,
uncertainty around the airport project results in us downgrading to
Neutral with a new Mar12 SOTP-based PT of Rs 160 (vs. Rs330).
• 3QF11 results- PAT beats estimates but no change in debt – HDIL
reported adjusted net income of Rs2.6B (+20% Q/Q, +58% Y/Y), ahead of
our estimate of Rs2.2B. Earnings beat was on account of higher TDR
volumes (1.25msf at Rs.3100 psf) and lower tax rates (6% vs. 15% in
1HFY11). Gross debt (at Rs41B) did not change during the quarter as the
QIP funds were largely deployed in new land acquisitions (Rs13B). The
company has acquired rights on a project consisting of 23K families in
Malad (Suburban Mumbai). This is one of the largest SRS project outside of
the airport.
• Our earnings estimates for FY11/12 remain largely unchanged as the
positive impact of shift in accounting policy effective Apr-11 to POCM (vs.
completed project method) is offset by slower TDR sales given lower
visibility on generation in FY12/13. Key risks are 1) Upside- Visibility on
airport resettlement 2) Downside- Further slowdown in transaction volumes
in Mumbai beyond what we have modeled (1.6 msf for FY12).
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