Unitech - Buy: Management Call Takeaways – Execution Ramping Up :: Citi

Unitech (UNTE.BO)
Buy: Management Call Takeaways – Execution Ramping Up
We spoke to Unitech management to get an update on execution and business.
Key takeaways are:
 Execution ramping up well — Liquidity concerns have been resolved. Workers at
project sites have increased to 20,000 now from ~10,000 at the bottom.
Management expects to increase this to 25,000 by March 13 end.
 Debt has stabilized — Consolidated net debt at Rs55.7bn (up from Rs54bn post
FY12) has more or less stabilized. Unitech has successfully rolled over ~Rs6-7bn of
debt due in 1HFY13. Given improved liquidity and business outlook, management
expects to successfully roll over balance debt due in 2HFY13.
 Sustained increase in prices (~5-6% in 2QFY13) will help margins – Realization
in 2QFY13 has increased 16% QoQ to Rs5400 psf. Out of this increase, ~5-6% is
from increase in price and remaining increase is due to mix improvement. Company
continues to witness steady increase in prices across locations and projects. This
increase in prices will help margins after 2-3 quarters, as the impact of legacy
projects on margins goes away.
 Sales bookings to reach ~Rs10bn/quarter in FY14 – Sales bookings will remain
steady at ~Rs7-8bn/quarter for next 2-3 quarters as company is not focusing on
launching new projects. Management believes that once focus on new launches
resumes, sales bookings can go above ~Rs10bn/quarter.
 Maintain Buy/1H — Risk/reward looks attractive. Margins/execution/launches are
likely to pick up from current levels over next 3-4 quarters. Resolution of the telecom
dispute would free up management bandwidth and help execution. Valuations
continue to be attractive and are at a discount to adjusted (for auditor’s comments)
Sep'13E book value of Rs34.

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