HDIL:Earnings below estimate. Refinance helps improve cash flow position significantly: JPMorgan

 Q3 results below expectations – Q3 PAT at Rs1.1B (-24% Q/Q, -31%
Y/Y) was significantly below our and consensus expectations. The
earnings miss was on account of lower margins (49% vs. JPMe- 55%)
and higher tax rate (38%). Revenues (Rs4.2B, +64% Q/Q) during the Q
were primarily driven by commercial FSI sales in Metropolis (~1msf in
Andheri W) project. There was no contribution from high-margin Virar
Vasai FSI sales in this quarter.
 Recent refinance helps ease cash flow position – Standalone net debt
came down by ~Rs2B and the company expects an additional Rs2B
reduction in Q4. Consolidated net debt, however, at Rs39.2 increased by
Rs1.2B Q/Q. Liquidity position for the company is now comfortable
post a recent finance wherein the company has been able to tie up longterm debt of 8-year tenure with a moratorium of 4 years, of which it has
drawn down Rs3B till Dec. With this, the company does not have any
significant repayments over the next 12 months. Cash on book is
Rs2.2B. Net D/E stood at 0.36x
 Launches improving at the margin – With the approval environment
improving in Mumbai, launches have started to pick up. Over the last Q,
the company launched a 0.6msf project in Virar Vasai. Going into Q4,
the company is guiding to new project launches in Ghatkopar (Mumbai)
and Pune.
 Project completions provide visibility on near-term revenue growth
– The company has four residential projects which are nearing
completion and are expected to be delivered soon. Given the company’s
completed project method of accounting, project completions should
result in meaningful scale-up in revenues/earnings over the next 2-3Qs.
 Conference call on Fri – Key questions will be: 1) Clarity on the recent
land purchase that management had aided HDIL for; 2) Debt reduction
strategy from hereon, and 3) Any update on the still stuck airport
rehabilitation project

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