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Cost overrun dents margin; liquidity challenges to persist in near-term; valuation attractive; maintain Buy with
revised target price of INR30
Unitech (UT)'s 4QFY12 numbers has been impacted by severe cost overrun (prior period adjustment done in
4QFY12). Core real estate EBIT margin was 17% as against 27-30% in 9MFY12. MTM loss provisioning relating to
dollar-linked investment further impacted profitability.
Revenue for the quarter declined 32% YoY to IN R7.2b, which is higher than our estimate of INR6b. However,
EBITDA declined by a steep 77% YoY to INR389m, much below our estimate of INR1.12b. EBITDA margin was
5.4%. PAT declined 97% YoY to INR33m, also due to higher effective tax rate.
For the full year, Revenue, EBITDA and PAT declined 23%, 57% and 56%, respectively. New launches declined
in line with the company's strategy guidance of focusing more on clearing execution backlog. Sales during the
year were 7.2msf/INR38b (ahead of estimate of INR36b), led by Noida projects, v/s 9.2msf/INR43b in FY11.
During 4QFY12, UT managed to re-finance the balance ~INR5b of repayment need of FY12. This has led to
temporary respite and we see the impact in the form of a sequential improvement of ~33% in revenue
booking from real estate projects. While the management has hinted at strong execution ramp-up in FY13,
we believe the ability to manage liquidity would be the most crucial factor, especially given that the company
has higher repayment (>INR10b) scheduled for FY13.
We expect near-term outlook to remain challenging due to liquidity headwinds adversely impacting execution
ramp-up and cash conversion cycle. We downgrade our NAV estimate by ~20% to INR40/share and cut our
target price by ~30% to INR30 (~30% discount to NAV) to align valuations to earnings growth outlook (implying
FY13 EBITDA multiple of 20.5x - the past one years' median multiple).
Nonetheless, we maintain our Buy recommendation due to steep valuation discount. The stock trades at ~
50% discounts to our revised NAV, 15.5x FY13E EBITDA (lower end of historical band) and 14x FY13E EPS. We
believe its land bank (BV of ~INR110b) offers strong support at INR19-20, limiting downside.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cost overrun dents margin; liquidity challenges to persist in near-term; valuation attractive; maintain Buy with
revised target price of INR30
Unitech (UT)'s 4QFY12 numbers has been impacted by severe cost overrun (prior period adjustment done in
4QFY12). Core real estate EBIT margin was 17% as against 27-30% in 9MFY12. MTM loss provisioning relating to
dollar-linked investment further impacted profitability.
Revenue for the quarter declined 32% YoY to IN R7.2b, which is higher than our estimate of INR6b. However,
EBITDA declined by a steep 77% YoY to INR389m, much below our estimate of INR1.12b. EBITDA margin was
5.4%. PAT declined 97% YoY to INR33m, also due to higher effective tax rate.
For the full year, Revenue, EBITDA and PAT declined 23%, 57% and 56%, respectively. New launches declined
in line with the company's strategy guidance of focusing more on clearing execution backlog. Sales during the
year were 7.2msf/INR38b (ahead of estimate of INR36b), led by Noida projects, v/s 9.2msf/INR43b in FY11.
During 4QFY12, UT managed to re-finance the balance ~INR5b of repayment need of FY12. This has led to
temporary respite and we see the impact in the form of a sequential improvement of ~33% in revenue
booking from real estate projects. While the management has hinted at strong execution ramp-up in FY13,
we believe the ability to manage liquidity would be the most crucial factor, especially given that the company
has higher repayment (>INR10b) scheduled for FY13.
We expect near-term outlook to remain challenging due to liquidity headwinds adversely impacting execution
ramp-up and cash conversion cycle. We downgrade our NAV estimate by ~20% to INR40/share and cut our
target price by ~30% to INR30 (~30% discount to NAV) to align valuations to earnings growth outlook (implying
FY13 EBITDA multiple of 20.5x - the past one years' median multiple).
Nonetheless, we maintain our Buy recommendation due to steep valuation discount. The stock trades at ~
50% discounts to our revised NAV, 15.5x FY13E EBITDA (lower end of historical band) and 14x FY13E EPS. We
believe its land bank (BV of ~INR110b) offers strong support at INR19-20, limiting downside.
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