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Real Estate
Potential result outperformers: Unitech
Potential result underperformers: DLF
Result Expectations – Key Highlights
We expect muted performance in 1Q from most of the real estate developers
given limited new launches. Unitech is though likely to report strong volume given
slew of launches across geographies. But other developers struggled to launch
new projects partly due to muted demand and partly due to delay in approvals.
We expect most of the developers to report QoQ growth in earnings supported by
improvement in margin. Last quarter saw a sharp contraction in margin for most
of the developers due to cost escalation in older projects, which is not likely to be
the case in 1Q. We are though building in fall in margin on YoY basis due to rising
construction cost and flat sale realization.
DLF - We expect DLF to report pre sales of closer to 2.5-3mn sq ft as DLF did not
launch any significant projects in 1Q. The plotted development in Gurgaon
launched in the last week of the quarter was the only large project launch.
Therefore for 1Q we expect revenue to drop by 10% QoQ to Rs24.1bn. The
EBIDTA margin is expected to rebound in 1Q to 42% from 25% in 4Q. (The
margin in 4Q was depressed as it recognized Rs4.2bn of charges for previous
qtrs). The improvement in EBIDTA margin should lead to 17% QoQ growth in net
profit to Rs4.05bn in 1Q.
Unitech –Unitech continued on its aggressive launch strategy in 1Q with slew
of project launches across Gurgaon, Chennai, Bangalore and other Tier 2 towns.
We expect this should translate into strong sales volume performance in 1Q of
2.5-3mn sq ft though realization is expected to be lower given higher contribution
from non Gurgaon projects. We are building in sharp improvement in margin to
29% from just 16% in 4Q leading to 42% growth in net profit.
HDIL –We expect HDIL to report strong 1Q results with revenue growth of 26%
at Rs6.6bn driven by sale of FSI of Rs4bn from its Andheri project (part of the
revenue was recognized in 4QFY11). The net profit is expected at Rs2.4bn, at
22% QoQ growth. We expect TDR sales to decline to 0.7mn sq ft against 0.9mn
sq ft as demand has come off given slowdown in sales volume for residential
segment. We saw only one launch by HDIL in 1Q and therefore the presale
volume is expected to be muted.
Sobha –We expect a muted performance by Sobha in 1Q since the benefit of
new launches will only start accruing from 2Q. Sobha launched its north
Bangalore project in late June while the Gurgaon project is expected in July.
These projects will be the key driver of sales volume for Sobha in FY12 given
their large size. Therefore we expect sales to decline by 8% QoQ while net profit
is expected to decline by 11%.
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