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UBS Investment Research
Godrej Properties
S trong 4Q
Event: 4Q beats UBSe and consensus
Q4 earnings grew rapidly on QoQ and YoY basis better than expected due to
strong EBITDA growth driven by operating leverage from development business
(vs. asset monetization previously). FY11 also reported strong revenue growth of
86% YoY, with earnings up 7% YoY. Leverage however increased to net debt of
Rs8bn with D/E at 0.85 (vs 0.78 in 3Q). Board declared a dividend of Rs4.5/share.
Impact: Expect growth to pick-up; maintain FY12 forecasts
With healthy pre-sales momentum in 4Q of 1.6msf pre-sold (vs. 0.8msf in 3Q);
construction progress encouraging we maintain our FY12 earnings forecasts of
33%. Its strategy to monetize assets will further boost earnings, in our view.
Action: Maintain Buy with price target of Rs890
We think Godrej is best-positioned given its superior corporate governance; capital
efficient model bodes well in a risk-averse environment. We see - 1) encouraging
pre-sales response to new launches in NCR, Chennai, and Pune township; 2) new
joint-development deals and 3) thrust on cash flows to maximize return, mitigate
risks and subsequently increase scale as the key catalyst for the stock.
Valuation: attractive at 50% discount to NAV of Rs1275
We see stock’s recent underperformance as a good opportunity to accumulate and
believe the embedded value of its developing group assets (Rs683) is available
cheap. Our target is based on a 30% discount to NAV factors in higher risks of
slow progress on new project wins and the development of the group’s assets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Godrej Properties
S trong 4Q
Event: 4Q beats UBSe and consensus
Q4 earnings grew rapidly on QoQ and YoY basis better than expected due to
strong EBITDA growth driven by operating leverage from development business
(vs. asset monetization previously). FY11 also reported strong revenue growth of
86% YoY, with earnings up 7% YoY. Leverage however increased to net debt of
Rs8bn with D/E at 0.85 (vs 0.78 in 3Q). Board declared a dividend of Rs4.5/share.
Impact: Expect growth to pick-up; maintain FY12 forecasts
With healthy pre-sales momentum in 4Q of 1.6msf pre-sold (vs. 0.8msf in 3Q);
construction progress encouraging we maintain our FY12 earnings forecasts of
33%. Its strategy to monetize assets will further boost earnings, in our view.
Action: Maintain Buy with price target of Rs890
We think Godrej is best-positioned given its superior corporate governance; capital
efficient model bodes well in a risk-averse environment. We see - 1) encouraging
pre-sales response to new launches in NCR, Chennai, and Pune township; 2) new
joint-development deals and 3) thrust on cash flows to maximize return, mitigate
risks and subsequently increase scale as the key catalyst for the stock.
Valuation: attractive at 50% discount to NAV of Rs1275
We see stock’s recent underperformance as a good opportunity to accumulate and
believe the embedded value of its developing group assets (Rs683) is available
cheap. Our target is based on a 30% discount to NAV factors in higher risks of
slow progress on new project wins and the development of the group’s assets.
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