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Unitech (UNTE.BO)
Neutral Equity Research
Below expectations: Revenues decline yoy, debt level stable
What surprised us
Unitech reported 4QFY11 results on May 29, 2011, with sales of Rs10.5bn
(-7% yoy), and net income of Rs1bn (-37% yoy) vs. our expectation of
Rs1.8bn. FY11 real estate revenues of Rs27bn indicate slow execution
against outstanding pre-sales of Rs150bn+. Key takeaways: 1) 4QFY11
sales were down yoy, despite an increase in the area under execution. The
construction workforce reduced across locations to 20,861, down by 1,600
workers qoq. 2) Unitech reported launches of 4.3mn sqft in 4QFY11 and
10.4mn sqft in FY11. 3) Area sold was 9.2mn sqft (valued at Rs52bn) for
FY11 and 2mn sqft in Q4FY11 vs. an annual guidance of 12mn sqft at the
beginning of the year. Area sold attributable to Unitech in FY10 was
14.2mn sqft. 4) 4QFY11 real estate EBIT margins for were down to 17% in
4QFY11 from 25% in Q4FY10, but margins have been volatile. 5) Gross
debt reduced by about Rs1.6bn yoy to Rs58.5bn as on end-March. 6)
Inventories increased significantly to about Rs194bn in 4QFY11 from
Rs172bn in 4QFY10, while net current assets increased by Rs10.5bn. 7)
Outstanding shares pledged by promoters were largely unchanged qoq.
What to do with the stock
We retain our Neutral rating, but cut our 12-month RNAV based target price to
Rs42 from Rs49, to factor in slower pace of execution, higher net debt and lower
value of investments. Our target price is set to a 30% discount (unchanged) to
our March-12 based RNAV of Rs59. We also cut our FY12E/FY13E EPS estimates
by 16%/21% to factor in slower than expected revenue recognition and
compression in EBIT margins. Introduce FY14 estimates. Risks: upside:
increased pace of execution, clarity on telecom issue; downside: delays in
completion of projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Unitech (UNTE.BO)
Neutral Equity Research
Below expectations: Revenues decline yoy, debt level stable
What surprised us
Unitech reported 4QFY11 results on May 29, 2011, with sales of Rs10.5bn
(-7% yoy), and net income of Rs1bn (-37% yoy) vs. our expectation of
Rs1.8bn. FY11 real estate revenues of Rs27bn indicate slow execution
against outstanding pre-sales of Rs150bn+. Key takeaways: 1) 4QFY11
sales were down yoy, despite an increase in the area under execution. The
construction workforce reduced across locations to 20,861, down by 1,600
workers qoq. 2) Unitech reported launches of 4.3mn sqft in 4QFY11 and
10.4mn sqft in FY11. 3) Area sold was 9.2mn sqft (valued at Rs52bn) for
FY11 and 2mn sqft in Q4FY11 vs. an annual guidance of 12mn sqft at the
beginning of the year. Area sold attributable to Unitech in FY10 was
14.2mn sqft. 4) 4QFY11 real estate EBIT margins for were down to 17% in
4QFY11 from 25% in Q4FY10, but margins have been volatile. 5) Gross
debt reduced by about Rs1.6bn yoy to Rs58.5bn as on end-March. 6)
Inventories increased significantly to about Rs194bn in 4QFY11 from
Rs172bn in 4QFY10, while net current assets increased by Rs10.5bn. 7)
Outstanding shares pledged by promoters were largely unchanged qoq.
What to do with the stock
We retain our Neutral rating, but cut our 12-month RNAV based target price to
Rs42 from Rs49, to factor in slower pace of execution, higher net debt and lower
value of investments. Our target price is set to a 30% discount (unchanged) to
our March-12 based RNAV of Rs59. We also cut our FY12E/FY13E EPS estimates
by 16%/21% to factor in slower than expected revenue recognition and
compression in EBIT margins. Introduce FY14 estimates. Risks: upside:
increased pace of execution, clarity on telecom issue; downside: delays in
completion of projects.
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