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Revenue disappointment
With revenues continuing to lag sales by 40%, Unitech’s 1Q results were
a disappointment. Unitech also took an additional write-off on an
investment, which depressed reported margins by 5ppts. Key positives
from the results were continued new project launch activity and a small
net debt reduction. The sales rate is maintained at 2m sf/qtr and Rs8bn
of customer inflows during the quarter was a positive. Progress/outcome
of the telecom investigations remain the biggest stock price driver.
Results disappointment on lower revenues
Unitech’s 1QFY12 net profit of Rs1.0bn, down 4% QoQ/ Down 45% YoY - was
below expectations. Revenues, at Rs6.0bn were down 28% YoY, and were a
big disappointment. Unitech’s real estate revenues have trailed sales by 40%
over the last five quarters. This highlights either a lack of ramp-up in
execution or previous sales being over reported, possibly due to cancellations.
Lower margins were partly made up by a retail property sale gain of Rs500m
reported in other income.
Investment write-off hits margins; Debt down
Reported Ebitda margins at 20% were below expectations of mid-20s as
Unitech took a further write-off of Rs300m on the remaining Rs1.15bn on an
investment (refer to our FY11 Annual Report Analysis note). We now build in
a further Rs300m loss during FY12. Adjusted for this, margins were 25%.
Unitech’s net-debt declined by Rs0.7bn QoQ; helped by inflows of Rs8.0bn
from business. Unitech also repaid Rs2.0bn of debt, Rs1.3bn via cash, as
refinancing/new loans remain tough to procure. Receivables rose a small
Rs0.3bn, much better than a sharp rise of Rs8.8bn during FY11.
New launches strong but tough macro dampens sales
Unitech launched 3.2m sf of new properties during 1Q, much better than
2.6m/sf average during FY11. Sales though were stagnant at 1.9m sf (65%
outside NCR), down 3% QoQ, as high mortgage rates have dampened a
quicker sales rate. Gurgaon launches, at 0.3m sf were low, and have been
bunched up in 2Q; which should help Unitech maintain its Rs10bn/quarter
sales rate. Deliveries, at 1.6m sf, were the highest over past seven quarters.
Earnings estimates cut by 5-8%
We cut our FY12-14 earnings 5-8% to build in slower execution and 4-9%
lower volumes. We now build in 6% volume sales growth in FY12. With
availability of financing limited, Unitech’s ability to improve its execution and
thereby cashflows is important. A continued sales rate implies that customer’s
confidence in Unitech has not been shaken much.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Revenue disappointment
With revenues continuing to lag sales by 40%, Unitech’s 1Q results were
a disappointment. Unitech also took an additional write-off on an
investment, which depressed reported margins by 5ppts. Key positives
from the results were continued new project launch activity and a small
net debt reduction. The sales rate is maintained at 2m sf/qtr and Rs8bn
of customer inflows during the quarter was a positive. Progress/outcome
of the telecom investigations remain the biggest stock price driver.
Results disappointment on lower revenues
Unitech’s 1QFY12 net profit of Rs1.0bn, down 4% QoQ/ Down 45% YoY - was
below expectations. Revenues, at Rs6.0bn were down 28% YoY, and were a
big disappointment. Unitech’s real estate revenues have trailed sales by 40%
over the last five quarters. This highlights either a lack of ramp-up in
execution or previous sales being over reported, possibly due to cancellations.
Lower margins were partly made up by a retail property sale gain of Rs500m
reported in other income.
Investment write-off hits margins; Debt down
Reported Ebitda margins at 20% were below expectations of mid-20s as
Unitech took a further write-off of Rs300m on the remaining Rs1.15bn on an
investment (refer to our FY11 Annual Report Analysis note). We now build in
a further Rs300m loss during FY12. Adjusted for this, margins were 25%.
Unitech’s net-debt declined by Rs0.7bn QoQ; helped by inflows of Rs8.0bn
from business. Unitech also repaid Rs2.0bn of debt, Rs1.3bn via cash, as
refinancing/new loans remain tough to procure. Receivables rose a small
Rs0.3bn, much better than a sharp rise of Rs8.8bn during FY11.
New launches strong but tough macro dampens sales
Unitech launched 3.2m sf of new properties during 1Q, much better than
2.6m/sf average during FY11. Sales though were stagnant at 1.9m sf (65%
outside NCR), down 3% QoQ, as high mortgage rates have dampened a
quicker sales rate. Gurgaon launches, at 0.3m sf were low, and have been
bunched up in 2Q; which should help Unitech maintain its Rs10bn/quarter
sales rate. Deliveries, at 1.6m sf, were the highest over past seven quarters.
Earnings estimates cut by 5-8%
We cut our FY12-14 earnings 5-8% to build in slower execution and 4-9%
lower volumes. We now build in 6% volume sales growth in FY12. With
availability of financing limited, Unitech’s ability to improve its execution and
thereby cashflows is important. A continued sales rate implies that customer’s
confidence in Unitech has not been shaken much.
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