Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Real Estate Developers
Equity Research
Dual impact of RBI action – Consumer demand and project funding
Interest rate hikes to negatively affect demand, raise funding cost
The Reserve Bank of India hiked its key policy rate by 50 basis points, inline
with GS Global ECS team expectations, and a bit ahead of consensus. We
believe that increased interest rates are likely to affect consumer demand
for real estate, as well as increasing funding cost.
Affordability another critical factor in the demand equation
We prefer companies with exposure to relatively affordable cities
(Bangalore, Noida) over those with exposure to cities where prices have
risen significantly in recent months (Mumbai, Gurgaon). We believe
exposure to Bangalore leaves Sobha and Prestige Estates with an
affordability cushion, in case of further increases in interest rates.
Prefer companies with a conservative pricing policy to push sales
In our opinion, companies focusing on sales volumes by maintaining
conservative prices will generate sufficient demand despite rising interest
rates. We believe that Sobha Developers has demonstrated an ability to
push volumes by maintaining rational pricing, below the prevailing market
rates and Oberoi by maintaining prices below market rates.
Companies with low leverage best positioned in a liquidity crunch
We believe that Oberoi Realty is best positioned to bid for attractive land
parcels given its strong net cash position. Also, our analysis suggests that
63% of our FY12E PAT for Oberoi Realty and 36% of our FY12E RNAV is
derived from ongoing and already sold projects, leased properties and
cash balances, giving us very high visibility to out PAT/RNAV estimates.
We also note the average net debt/equity for the 10 stocks under our
coverage is only 0.39X in FY11E, significantly lower than 0.93X in FY09.
Buy Sobha Developers (on CL), Oberoi Realty
We maintain our Buy rating on Sobha Developers (12-m FY12E RNAV
based TP of Rs344, on CL) as we believe that expansion into new cities will
drive volumes and revenue growth for the company over FY11-FY13E. We
also maintain our Buy rating for Oberoi Realty (12-m FY12E RNAV based
TP of Rs327) on the back of their rational pricing strategy. Key risks to our
view include rapid price hikes exerting pressure on volumes, interest rate
risk and volatility in input costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Real Estate Developers
Equity Research
Dual impact of RBI action – Consumer demand and project funding
Interest rate hikes to negatively affect demand, raise funding cost
The Reserve Bank of India hiked its key policy rate by 50 basis points, inline
with GS Global ECS team expectations, and a bit ahead of consensus. We
believe that increased interest rates are likely to affect consumer demand
for real estate, as well as increasing funding cost.
Affordability another critical factor in the demand equation
We prefer companies with exposure to relatively affordable cities
(Bangalore, Noida) over those with exposure to cities where prices have
risen significantly in recent months (Mumbai, Gurgaon). We believe
exposure to Bangalore leaves Sobha and Prestige Estates with an
affordability cushion, in case of further increases in interest rates.
Prefer companies with a conservative pricing policy to push sales
In our opinion, companies focusing on sales volumes by maintaining
conservative prices will generate sufficient demand despite rising interest
rates. We believe that Sobha Developers has demonstrated an ability to
push volumes by maintaining rational pricing, below the prevailing market
rates and Oberoi by maintaining prices below market rates.
Companies with low leverage best positioned in a liquidity crunch
We believe that Oberoi Realty is best positioned to bid for attractive land
parcels given its strong net cash position. Also, our analysis suggests that
63% of our FY12E PAT for Oberoi Realty and 36% of our FY12E RNAV is
derived from ongoing and already sold projects, leased properties and
cash balances, giving us very high visibility to out PAT/RNAV estimates.
We also note the average net debt/equity for the 10 stocks under our
coverage is only 0.39X in FY11E, significantly lower than 0.93X in FY09.
Buy Sobha Developers (on CL), Oberoi Realty
We maintain our Buy rating on Sobha Developers (12-m FY12E RNAV
based TP of Rs344, on CL) as we believe that expansion into new cities will
drive volumes and revenue growth for the company over FY11-FY13E. We
also maintain our Buy rating for Oberoi Realty (12-m FY12E RNAV based
TP of Rs327) on the back of their rational pricing strategy. Key risks to our
view include rapid price hikes exerting pressure on volumes, interest rate
risk and volatility in input costs.
No comments:
Post a Comment