Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Property
India
Some weakness though not a crash landing. Analysis of Propequity data indicates
some softening in price increases and an mom decline in residential launches and sales.
4QFY11 results have raised concern on margins due to cost inflation with all companies
in our universe reporting a qoq decline. Our top picks are (1) Sobha (BUY, TP Rs380) –
Bengaluru residential, (2) Oberoi (BUY, TP Rs315) – visible NAV and net cash and
(3) Phoenix (BUY, TP Rs300) – three mall openings in FY2012E are potential triggers.
Residential market data indicates a softening at the margin
Launches declined to 13.5 mn sq. ft in March 2011 (from 21.5 mn sq. ft in February 2011) as
developers got cautious and regulatory hurdles delayed approvals and hence launches.
Anecdotally, we hear of approval hurdles easing out in Mumbai and Bengaluru and also
Mumbai developers looking to soft launch a few projects.
Though we hear of a marginal price discount across developers for perceived genuine buyers,
data still indicates to flat to marginally up pricing though prices in Mumbai are clearly flattening
out.
Total absorption of 14.4 mn sq. ft is the lowest since March 2010 – declining absorption
continued in Mumbai while other regions too saw a declining trend.
Cost inflation-led margin pressure has emerged as an added concern
While most NCR-based firms (DLF, UT) reported better-than-expected revenues and in-line or
marginally negative sales and launches, Bangalore-based firms disappointed on lack of new
launches. EBITDA margin for all firms declined on a qoq basis and also on a yoy basis (except for
IBREL which had negative EBITDA margin in 4QFY10). While the NCR focused firms (DLF and UT)
witnessed higher declines, Bengaluru firms faced relatively benign pressure.
Selective stance stays – BUY Sobha, Oberoi and Phoenix Mills
Over the past one month, the sector has performed in line with the BSE Sensex led by DLF
which is up 7% over the period. We continue to recommend a selective approach as (1)
transmission of sector pressure to developers is now visible while impact on prices could
be felt with a lag, (2) funding is still constrained and our discussion with companies and other
sector participants leads us to believe that raising equity at the entity level remains a nearimpossible
task while raising debt has also become more difficult and effective borrowing costs
have increased, and (3) company-specific risks continue to remain high. Oberoi, Phoenix and
Sobha are our top picks as we believe they are relatively insulated (Oberoi – net cash, Phoenix –
retail, Sobha – Bengaluru residential) and have potential upside (Oberoi – NAV accretive land
purchases, Phoenix – three mall openings in FY2012E and Sobha – launch of large projects in
Bengaluru and Gurgaon).
Launches decline as developers get cautious
Total launches decreased to 13.5 mn sq. ft in March 2011, down 37% from 21.5 mn sq. ft
in February 2011.Bengaluru had the least fall while NOIDA launch volumes fell 60% monthon-
month. While part of this decline could be attributed to lower potential demand,
regulatory/clearance-led delays were partly responsible for weakness in Mumbai, Bengaluru
and NOIDA. Anecdotally, we hear of Mumbai developers exploring pre-launch of their
projects (Lodha, Sunteck, Rustomjee) and Bengaluru developers near to getting approval.
Also, as per news reports, BMC has cleared a backlog of 70 projects in Mumbai which could
push up launches in 2QFY12E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Property
India
Some weakness though not a crash landing. Analysis of Propequity data indicates
some softening in price increases and an mom decline in residential launches and sales.
4QFY11 results have raised concern on margins due to cost inflation with all companies
in our universe reporting a qoq decline. Our top picks are (1) Sobha (BUY, TP Rs380) –
Bengaluru residential, (2) Oberoi (BUY, TP Rs315) – visible NAV and net cash and
(3) Phoenix (BUY, TP Rs300) – three mall openings in FY2012E are potential triggers.
Residential market data indicates a softening at the margin
Launches declined to 13.5 mn sq. ft in March 2011 (from 21.5 mn sq. ft in February 2011) as
developers got cautious and regulatory hurdles delayed approvals and hence launches.
Anecdotally, we hear of approval hurdles easing out in Mumbai and Bengaluru and also
Mumbai developers looking to soft launch a few projects.
Though we hear of a marginal price discount across developers for perceived genuine buyers,
data still indicates to flat to marginally up pricing though prices in Mumbai are clearly flattening
out.
Total absorption of 14.4 mn sq. ft is the lowest since March 2010 – declining absorption
continued in Mumbai while other regions too saw a declining trend.
Cost inflation-led margin pressure has emerged as an added concern
While most NCR-based firms (DLF, UT) reported better-than-expected revenues and in-line or
marginally negative sales and launches, Bangalore-based firms disappointed on lack of new
launches. EBITDA margin for all firms declined on a qoq basis and also on a yoy basis (except for
IBREL which had negative EBITDA margin in 4QFY10). While the NCR focused firms (DLF and UT)
witnessed higher declines, Bengaluru firms faced relatively benign pressure.
Selective stance stays – BUY Sobha, Oberoi and Phoenix Mills
Over the past one month, the sector has performed in line with the BSE Sensex led by DLF
which is up 7% over the period. We continue to recommend a selective approach as (1)
transmission of sector pressure to developers is now visible while impact on prices could
be felt with a lag, (2) funding is still constrained and our discussion with companies and other
sector participants leads us to believe that raising equity at the entity level remains a nearimpossible
task while raising debt has also become more difficult and effective borrowing costs
have increased, and (3) company-specific risks continue to remain high. Oberoi, Phoenix and
Sobha are our top picks as we believe they are relatively insulated (Oberoi – net cash, Phoenix –
retail, Sobha – Bengaluru residential) and have potential upside (Oberoi – NAV accretive land
purchases, Phoenix – three mall openings in FY2012E and Sobha – launch of large projects in
Bengaluru and Gurgaon).
Launches decline as developers get cautious
Total launches decreased to 13.5 mn sq. ft in March 2011, down 37% from 21.5 mn sq. ft
in February 2011.Bengaluru had the least fall while NOIDA launch volumes fell 60% monthon-
month. While part of this decline could be attributed to lower potential demand,
regulatory/clearance-led delays were partly responsible for weakness in Mumbai, Bengaluru
and NOIDA. Anecdotally, we hear of Mumbai developers exploring pre-launch of their
projects (Lodha, Sunteck, Rustomjee) and Bengaluru developers near to getting approval.
Also, as per news reports, BMC has cleared a backlog of 70 projects in Mumbai which could
push up launches in 2QFY12E.
No comments:
Post a Comment