On track to achieve FY15E guidance - Prestige Estates Projects :: HDFC Securities

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Buy Prestige between Rs 230 and Rs 237.Stoploss at Rs 222 :: HDFC Securities

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Wipro, Prestige Estates, Indsurials:: Kotak PDF links

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Company alerts
Wipro: Valuations still to catch up with improving fundamentals
 Broad-based deal closures are encouraging signs of success in revitalizing sales
 Consistency critical for re-rating push
 Valuations still at a discount despite business improvement

Prestige Estates Projects: Sales and collections increase, so do investments
 Sales fare well but cash flow from operations declines in FY2014
 Debt increases by Rs7.6 bn, we are comfortable with the positive yield spread
 Valuationswe maintain our REDUCE rating with a March 2016 target price of Rs240

Sector alerts
Industrials: T&D: strong pick-up visible; large opportunity best captured by Alstom T&D
 Strong pick-up in T&D commissioning without private-sector support
 Natural impetuspent - up demand strong enough to add to growth in generation
 Opportunities unfold for high-technology solutions in core and grid-protection equipment
 Alstom T&D - strong, pure-play bet to capture the T&D growth
 Transmission-line companies: bandwidth limits potential to leverage sectoral opportunity


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Prestige Estate- Operating performance continues to beat guidance :JPMorgan

Prestige Estate Projects Limited (PEPL IN) Operating performance continues to beat guidance		Overweight Price: Rs169.75 21 Apr 2014 Price Target: Rs205.00 PT End Date: 30 Mar 2015

Prestige continues to deliver steady operating performance and has managed to meet/surpass its guidance levels across all operating metrics, despite a challenging macro. The company’s FY14 pre-sales and collections at Rs36B/Rs25B were up 16% Y/Y and 26% Y/Y, respectively. The pick-up in collections in Q4 is impressive at Rs6.6B (vs Rs5.9B last Q) and we believe this should continue to accelerate ahead (catch-up to pre-sales). Overall, the operating results reaffirm our hypothesis that over the next two years the company is poised to more than double its operating cash flows and earnings based on simple catch-up to pre-sales and locked-in rental growth (80%).

HSBC Research, Looking at mid-cap themes for 2014

 Mid-caps have underperformed largecaps in the last 6 years. With no easing
in sight we remain selective on them
 Three themes to play in 2014:
insulation from leverage-related stress;
rising utilisation; and strong earnings
momentum with reasonable valuations
 Analysts’ preferred plays: PTCIN, IPCA,
TRP, PEPL, BHFC, LICHF and ILFT

Prestige Estates Projects :Operations strong; pick-up in deliveries/rentals key: Religare Research

Operations strong; pick-up in deliveries/rentals key
PEPL posted steady sales in Q3FY14 (1.5msf/Rs 9.4bn) aided by the big
launch (Lakeside Habitat) in Bengaluru. This along with collections/leases of
Rs 5.9bn/~0.7msf mean that the company remains comfortably placed
vis-à-vis its full-year guidance. We however expect launches to moderate as
the focus shifts to inventory liquidation and execution. Thus, a pick-up in
deliveries and an improvement in the rental portfolio should be the key
performance indicators for PEPL from here on. Maintain BUY.
 New sales remain buoyant: PEPL reported pre-sales of 1.55msf/Rs 9.4bn helped by
the launch of Lakeside Habitatin Bengaluru. As of Dec’13, PEPL has achieved 82% of
its annual sales target. Management suggests a moderation in new launches for a few
quarters, which should mean a corresponding moderation in volumes.
 Collections remain steady: Customer advances came in at Rs 5.9bn, thus meeting
79% of its annual collection target of Rs 23bn. Management indicated that the QoQ
decline in customer advances was normal, and the number should pick up again in
Q4FY14. We also expect customer advances to improve through FY15 as new sales
start contributing.
 P/L numbers to remain flat: While construction activity across projectsremains on
track, the P/L numbers may not improve significantly in the absence of big projects
hitting the revenue-recognition threshold. We estimate Q3FY14 revenue/PAT at
Rs 4.7bn/Rs 0.8bn (-2%/+1% QoQ), and as per management, these numbers should
improve in Q4 led by the first-time revenue recognition fromsome projects.
 Maintain BUY: PEPL has improved itsscale of business, which is reflected in its
sales/launches. We however expect launches to moderate for the next few quarters
and hence see limited near-term volume growth potential. Thus, a pick-up in
deliveries/an improvement in the rental portfolio remain key growth triggers. BUY.

Sizzling Stocks: Prestige Estates Projects, Tata Motors :: Business Line

 

Prestige Estates Projects (PREG.BO) Buy: Good Start to FY14 – Well Begun Is Half Done! :: Citi Research

Prestige Estates Projects (PREG.BO)
 Buy: Good Start to FY14 – Well Begun Is Half Done!
 Top pick in India Property — We continue to like Prestige given its strong operational
performance, transparent NAV with high visibility, good disclosures and exposure to the
relatively better markets in South India. Post the ~25% correction in the last 2 months
(~20% underperformance vs Sensex), valuations at ~1.45x P/BV look reasonable.
 Strong start to FY14 — Strong sales in Q1 at Rs10.2bn (1.77msf) means Prestige is
well on track to achieve its FY14 guidance of ~Rs37bn. New launches at ~4msf (FY14
guidance of 14msf) helped fuel the strong sales. New leasing at 0.44msf (Prestige's
share of 0.16msf) was in line with FY14 target of 2msf. With an exit rental income of
Rs2.8bn, we believe the FY14 guidance of Rs3.2bn should be comfortably achievable.
 ~Rs56bn unrecognized revenue provides visibility — Prestige plans to launch
~10msf over the next three quarters and has unrecognized revenues of ~Rs56b, which
should support strong EPS CAGR over FY13-15E (even on a high base). Management
expects projects with accumulated revenues of ~Rs16bn to hit the ~25% recognition
threshold in FY14.
 Deliveries pick up; execution is key in the sector — Prestige delivered 2.48msf in
Q1, a big pick-up vs ~2.3msf in FY13. Execution remains the biggest ask from
investors in the property sector – sustenance is key.
 Dividends could go up over the next two years — Once the rental portfolio matures
and reaches ~Rs5bn run rate, the company plans to finalize a dividend policy wherein
~50% of rental income is paid out and the balance reinvested – helping Prestige add
~1msf annually without incremental borrowing.
 Change in Est; TP to Rs170 — We trim our ests marginally by ~1-2% incorporating
recent results, higher margins and interest/tax assumptions. We trim our TP to Rs170
factoring in: (1) revisions in net debt, customer advances and land bank, (2) marginal
increase in the tax rates to ~29%, (3) some push backs in the development portfolio,
(4) roll forward to Sep'14E from Mar'14E earlier. Our TP equates to ~1.8x Sep'14E BV.

Prestige Estates -BUY Target: `205 (Dec’13) JM Financial

Balanced portfolio with comfort of South
Prestige Estate is one of the largest developers in Bangalore real estate
market with strong cashflow profile (from completed and existing ongoing
projects), healthy fresh sales momentum (average `7bn/qtr of fresh sales in
last 5 quarters), large outstanding order book pending revenue recognition
(`48bn) and growing rental income. We like Bangalore real estate market
from the volume offtake and pricing perspective. The southern market
presence and a balanced portfolio of investment and development
properties are the key reasons for us to like Prestige Estates. Initiate with
BUY and NAV based target price of `205 (Dec’13).

Prestige Estates- FY13 sales booking to beat guidance by ~20% :: Motilal Oswal

FY13 sales booking to beat guidance by ~20%
Execution on track to meet revenue booking, collections uptick guidance
We met Prestige Estates Projects’ (PEPL) management and visited key sites to get updates
on the business and outlook of Bangalore real estate market. The key takeaways are:
 Despite moderation in the launch plan over 2HFY13, PEPL is comfortably poised to
beat FY13 sales guidance of ~INR25b by almost 20%. 8MFY13 sales stood at ~INR22.5b.
 Execution progress steady in most annuity assets. We estimate annualized rental
income to post ~35% CAGR over FY12-15E to ~INR4.6b.
 Progress in development projects are on track to meet guidance of 2-2.5x scale-up in
quarterly revenue run-rate. We expect an uptick in collections run-rate to INR6b/Q.
 Upgrading our NAV-based target price by ~9% to INR195 and FY13E/14E EPS estimates
by 4-8%. While the stock has already been re-rated in line with expectation, further
upside hinges on strengthening of P&L and cash flow hereon. Maintain Buy.

Prestige Estates Projects- Healthy sales performance continues :Prabhudas Lilladher

Prestige Estates Projects: Flying High : Nirmal Bang

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Flying High
We recommend Prestige Estates Projects (PEPL) because of its strong presence
across segments in Bangalore (71% of its land bank) where the absorption level
continues to remain healthy unlike in other markets in India. PEPL’s operating
cash flow is set to improve over the next two years with improvement in
realisation from debtors and higher rental income. We believe an outstanding
sum of Rs4.3bn related to Shantiketan (Bangalore) project likely to be received
by PEPL over the next three quarters (Rs1bn received in 3QFY12) as the office
leasing environment remains conducive in Bangalore. We expect PEPL’s yearly
rental run rate to show a CAGR of 23% over FY12-14E at Rs2.8bn wherein 25% of
incremental supply is pre-committed. Also, most of its projects like White
Meadows/Kingfisher Tower/Polygon would cross the threshold limit in coming
quarters, thereby driving up revenues. We assign a Buy rating to PEPL with a
target price of Rs143.
Absorption level to remain strong in Bangalore: Our interaction with various real
estate brokers indicated that absorption in the residential segment will remain strong in
2012, thanks to demand from the IT/ITES sector and better affordability compared to
other cities in India. Around 90% of the brokers indicated that residential prices are
expected to go up by 10-15% over the next six-nine months from current levels.
Though demand in Bangalore is largely dependent on the IT/ITES sector, the recent
absorption was driven across sectors, which augurs well for developers. Also, brokers
have indicated that Bangalore (East) has a greater potential with respect to absorption
on account of upcoming IT/ITES offices. This is a positive for PEPL which has land
bank at Whitefield, Sarjapur and Marthahalli, all located in Bangalore (East).
Sufficient cash flow to fund annuity assets, debt obligations: We expect PEPL to
maintain its existing pre-sales run rate of Rs20bn in FY13 because of its aggressive
new project launch pipeline and steady Bangalore market, also enabling it to maintain
the run rate of Rs3bn customer advances/quarter. PEPL’s debtors increased by Rs6bn
in FY11 on account of the ongoing completion of its Shantiketan and Oasis projects (in
Bangalore), which was a major overhang on its stock’s performance. However, the
company managed to realise Rs2.8bn from Shantiketan and Oasis projects as it
focused on handover and also on improvement in leasing activity in the Shantiniketan
project. Consequently, we expect PEPL to generate Rs11bn of cash flow from
operations over FY11-14E versus Rs5.2bn of negative operating cash flow generated
over FY08-11, which would suffice to meet its capex requirement and debt obligations.
Valuation: At the CMP, PEPL trades at 1.3x P/BV and 9.2x P/E on FY14E earnings
and at 40% discount to our one-year forward NAV. We assign a Buy rating to PEPL
with a TP of Rs143 based on 20% discount to one-year forward NAV from real estate
business and assigning 12x FY14E profits to its facilities and management business.

Prestige Estate Projects: TP: INR126 Buy: Motilal oswal,

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 Prestige Estate Projects (PEPL) reported lower than expected standalone numbers for 3QFY12. Standalone
EBITDA declined 46% YoY to INR501m; EBITDA margin was 30% (v/s 38.4% in 2QFY12 and 23.4% in FY11).
Standalone revenue declined 54% YoY to INR1.7b, while PAT was INR281m (v/s INR544m in 3QFY11).
 Sales momentum remains strong at ~1msf (INR4.7b), though lower than ~2.1msf (INR7.8b) in 2QFY12. Sales
for 9MFY12 were 3.6msf (INR14.6b) as against management guidance of INR15b-17b and our estimate of
INR17b for FY12.
 Despite strong sales, revenue booking was subdued due to (a) non-commencement of revenue from White
Meadows and Tech Park III (management had earlier guided revenue recognition in 2HFY12), and (b) further
delay in getting completion certificate for Neptune Courtyard (expected completion in 3QFY12). No major
commercial leasing happened during 3QFY12 - rental income was INR399m v/s INR385m in 2QFY12.
 Consolidated net debt stood at INR14b (effective exposure of PEPL is INR12.1b) v/s INR13b in 2QFY12. Cost of
debt moderated to 13.5% (v/s 13.61% in 2QFY12).
 We believe that with its wider product presence and client base, PEPL would be a key beneficiary of the
outperforming Bangalore market. Key triggers for the stock: (a) improvement in customer collection and
debtors, (b) on-time monetization and execution of flagship projects such as Golfshire, Kingfisher Tower, etc,
and (c) acquisition of new turnkey projects.
 The stock trades at 8.8x FY13E EPS of INR8.8x FY13E BV, and at 51% discount to our NAV estimate. Maintain Buy.

Prestige Estates Projects :Top-line miss; receivables down; volumes strong : Nomura Research

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Prestige’s 3QFY12 top line of ~INR1.7bn missed our as well as
consensus estimates by 18% and 12%, respectively. This miss was on
account of non-completion of the Prestige Neptune Courtyard project
which was expected to be completed during the quarter. At the PAT
level, the miss was lower at 8% due to lower-than-expected interest
expense.
The key positives from results were continuing strong sales volume
momentum at its new projects, as well as a pick-up in the pace of
realisation of its sundry debtors. In 9MFY12, the company already nearly
achieved its full-year FY12F sales guidance of INR15-16bn. We remain
positive and maintain our BUY on the stock, which is currently trading at
a 47% discount to our NAV of INR143 per share and 38% discount to
our price target of INR122 per share.
Top line misses estimates due to non-completion of one project
 Prestige Estate’s standalone 3QFY12 revenue of ~INR1.7bn (-54%
y-y and +30% q-q) missed our as well as consensus estimates by 18%
and 12%, respectively. The miss was on account of lower revenue
contribution from Prestige Neptune Courtyard, the project which was
expected to be completed during the quarter.
 Overall EBITDA margin at 30% (+400bps y-y and -800bps q-q) was
largely in line with our estimate of 29%. The q-q drop in the margin
reflects a higher contribution from sales of residential and commercial
projects, which have a lower margin vis-à-vis that on investment
properties.
 On the back of lower revenue, EBITDA at INR502mn (-46% y-y and
+2% q-q) missed our as well as the Street’s estimates by 14% and
11%, respectively.
 Interest expense at INR159mn was lower than our expectation of
INR214mn because the higher-than-expected interest cost was
capitalised. The reason for higher interest capitalisation was on the
back of a higher revenue contribution from the sale of completed
commercial property.
 Due to lower interest expense, the earnings miss at the PAT level was
only ~8% versus our and consensus estimates of INR306mn and
INR308mn, respectively.

Prestige Estates Projects Ltd (PREG.BO) Q2FY12: Topline Disappoints; Record Sales Bookings   Citi research

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Prestige Estates Projects Ltd (PREG.BO)
Q2FY12: Topline Disappoints; Record Sales Bookings
 Revenue drops 57% YoY — Revenue fell short of our estimates at ~Rs 1.3bn, down
57% YoY/48% QoQ- with Shantiniketan out and few projects not crossing the
recognition hurdle. EBITDA margins improved significantly to 38% (vs 28% in Q1/19%
in Q4FY11) given higher-margin revenue mix. Management expects margins to remain
in mid 30's going forward. PAT at Rs 263m declined 51% YoY/28% QOQ.
 Record sales momentum — Strong sales in Q2- 2.1msf (Rs 7.8bn) sold versus
1.9msf sold in whole of FY11- on track to achieve Rs 15-16b FY12 sales guidance.
While traction in premium projects seems relatively slow, mid-income projects are
seeing robust bookings - 1.9msf sold in Q2. Also, company pre launched Sunny Side
(~0.7msf) – of the 395 units, 43 sold as at 30 Sept and >100 stand sold by 30 Oct.
 Commercial holding up for now — Steady performance in Q2 - leased 0.7msf vs
~1.0msf in Q1; rentals remain steady. Management highlighted that impact of global
slowdown has not yet been felt - enquiries remain healthy. In fact it indicated that a few
large size transactions are in the pipeline and should close soon. In 1H, the company
has leased 1.7msf (vs FY12 guidance of 2.8-3.0msf).
 Other key updates — (1) Unrecognized revenue of ~Rs 24bn, up by 44% QoQ
primarily on the back of good response to recent mid income housing launches, (2)
Bellavista (Chennai) and Mayberry (Bangalore) launch expected in Q3, (3) Added
~1.0msf of developable area spread across Bangalore, Chennai and Mysore and
further land bank in Bangalore and Goa, (4) Reduced cost of debt by ~65bps (13.6%).
 Tweak Estimates, Maintain Buy — We cut our TP/Avg NAV to Rs 128/Rs 160 (vs Rs
133/166 earlier). Positive impact from land bank addition was more than set off by
moderation in execution schedule and increased net debt, customer advances.
However, our numbers could see some upside as we are yet to incorporate ~1.0msf of
new projects. Impressive operating momentum and attractive valuations – Maintain
Buy. Risks- Slowdown in IT/ITES, regulatory risks, slow execution.

Prestige Estates – Operationally on track  :: Citi Research

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Prestige Estates – Operationally on track
 Launches: Prestige launched two projects in Bangalore totaling ~0.8msf in Q2 –
(1) Premium city centre project called Edwardian (0.05msf) where all approvals
are in place and (2) High end Sunny Side development (0.72msf) behind Cessna
Business Park. Bellavista Chennai (~3.7msf) launch should happen in Oct-Nov.
 Sales: Projects launched in Q1 end have received good response: (1) Park View
– ~200 units of the 247 total units stand sold (2) Tranquility – ~1300 units of the
2310 units stand sold. For new projects, ~1 of the 12 units in Edwardian have
been sold and ~45-50 units of the 395 units in Sunny Side have been sold.
 Delivery: Palladium in Chennai and Dynasty in Bangalore have been completed
in Q2. Dynasty is a sold-out project (currently fully occupied by Citrix). In
Palladium, company has followed a mixed model of outright sale and lease.
Overall, ~2.0msf has been handed over by Prestige YTD.
 Leasing: Company has seen some traction in Shantiniketan commercial
inventory- leased ~ 0.5-0.55msf @ ~Rs 30/sf. Pipeline is looking good here and
more enquiries should convert in the coming months.
 Financial performance: We expect a relatively flat top-line performance in Q2
given steady execution in the existing projects and no new projects cross the
revenue recognition threshold. Margins should improve steadily going forward as
low margin Shantiniketan project is out of the books. But due to higher interest
expense, we expect PAT to come largely in-line with Q1.

UBS:: Prestige Estates Projects- Deep value; Best Bangalore growth proxy

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UBS Investment Research
Prestige Estates Projects
D eep value; Best Bangalore growth proxy
�� Event: Strong Bangalore pre-sales in Jul’11, re-enforces our confidence
With residential pre-sales (3.35msf) for Jul’11 up 37% YoY, 13% MoM, 7% YTD.
Further mgmt meeting re-enforces our confidence given – 1) Prestige sales of
~1.6msf in current qtr (vs. 0.48msf in 1Q) and 2-prime location launches on anvil
(~420 apts); 2) steady leasing momentum; 3) Thrust on reducing Shantiniketan
debtors + unsold inventory and execution based on our few site visits.
�� Impact: Maintain our 39% EPS CAGR FY11-14E
Given our expectations of strong pre-sales momentum continuing, rental (Rs1.4bn
pa in FY11) growing at 18% CAGR for FY11-13E with new assets getting leased;
and its ongoing high-value projects likely to be recognized in 4Q12 – we maintain
our 39% earnings CAGR, and believe FY12E growth will be more back-ended.
�� Action: Reiterate BUY; Continuing pre-sales, cash flow visibility the key
We see 1) strong pre-sales to upcoming launches (6-8msf in 9mFY12) 2) cash
flows (Rs8-10bn) from monetizing Shantiniketan’s debtors, unsold built stock and
office space; 3) growth of leased portfolio, 4) encouraging execution for ongoing
projects (47% of NAV) as key catalysts. Key risks are 1) potential slowdown in IT
sector, 2) relatively high exposure to luxury housing in Bangalore e.g Whitefield.
�� Valuation: Deep value at 68% disc to NAV, 1.2x P/BV
Stock’s 35% fall over last 3-mths seems unwarranted given strong fundamentals,
ROE-ROCE’s of 13-14% (among highest in the sector). While high rates regime is
an overhang, but see deep value outweigh risks. Prestige is our best exposure to
Bangalore’s growth (84% of NAV), the most promising market, in our view. Our
Rs205 price target is based on a 25% discount to our FY11E NAV/share of Rs275.


Risks
We believe the key risks for Prestige are 1) Potential decline in IT demand
following concerns on global recession impacting demand for commercial space
in Bangalore (IT hub of India); However, we believe concerns of a potential
significant slowdown are unwarranted as most IT companies continue to expand
significantly 2) Its relatively high exposure to premium residential housing (20%
of NAV) which is more prone to affordability issues amidst any slowdown in
recovery cycle, 3) intensifying competition in Bangalore and oversupply
concerns in particular pockets like Whitefield (17% of our NAV).
Valuation attractive at 67% disc to NAV
We believe Prestige’s core presence in Bangalore’s residential and commercial
markets, prime location land assets, domain expertise in residential, commercial
and integrated development projects, high proportion of rental assets and a
strong brand name differentiate the company.
Our price target of Rs205 is based on a 25% discount to our FY11E NAV/share
of Rs275. However, its lower discount vs. peers of 25-40% largely factors in 1)
Prestige’s dominant position and diversified asset mix in attractive Bangalore
market, 2) large contribution (23% of NAV) from rental yielding assets with
growth potential; 3) strong track record and brand franchise; and 4) concerns of
oversupply issues. Our base-case NAV/share of Rs275 involves the following
assumptions: 1) developmental volume of 44.85msf; 2) 9% cap rate for rental
yielding assets; 3) no price escalations; 4) average cost of capital of 14%; and 5)
a tax rate of 25%.


􀁑 Prestige Estates Projects
Prestige Estates Projects (Prestige) is a South India-focused real estate developer
with a diversified real estate portfolio in residential, commercial, retail, and
hospitality. Most of its developable area is in Bangalore (84%) and it is now
expanding to other South Indian cities. Prestige also provides allied services,
such as interior design, property management services, and sub-letting services.
Established 24 years ago, Prestige has developed a number of landmark
properties in Bangalore, including UB City, Prestige Shantiniketan, and the
Forum Mall.
􀁑 Statement of Risk
Risks to Prestige are a high exposure to high-end/luxury projects, high exposure
to Bangalore and a decline in commercial leasing and activity and regulatory
policy risks

Buy Prestige Estates Projects -- TP: INR157 :: Motilal oswal,

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 Strong brand, diversified product mix: Prestige Estates (PEPL) has a diversified
portfolio in established locations or growth corridors of key South India cities,
especially Bangalore. It enjoys strong trust and customer preference due to (1)
its diversified and well-balanced product positioning across verticals and customer
segments, (2) a superior execution track record (almost 44msf over the past 25
years) with identifiable landmarks and (3) its strong relationships with a growing
corporate client base.
 Promising markets, quality assets render meaningful cash-flow visibility:
We believe PEPL will enjoy steady monetization due to a stable outlook for the
real estate (RE) sector in most southern cities due to (a) steady hiring outlook of
the IT/ITES sector, driving housing demand and commercial leasing and (b)
affordability for buyers, led by the rational movement of property prices. However,
its heavy inclination towards annuity projects and strong near-term capex plans
are likely to dent free cash flow over the next couple of years.
 Steady revival of the commercial vertical to boost annuity income:
Bangalore has been in the forefront of commercial recovery, driven by renewed
momentum in corporate expansion in the IT/ITES sector. PEPL is well placed to
benefit from the commercial uptrend with (1) 2.5msf of rent-yielding and ~3.4msf
of upcoming projects and (2) a strong and growing MNC/domestic client base.
Prestige's JV with CRIDF, an associate of Capital Malls Asia, will help it to expand
in the retail vertical, which comprises 19% of PEPL's GAV. We estimate annuity
income from commercial and retail segments will show an uptrend from INR1.5b
in FY11 to INR2.5b in FY13.
 Key triggers: These include (a) de-risking of the IT growth outlook, (b) faster
execution of luxury projects like Kingfisher Tower, Golfshire and White Meadows
and (c) acquisition of new turnkey projects through the JDA route.
 Key risks: These include: (a) over-dependence on the Bangalore market (it
accounts for ~80% of PEPL's GAV), whose outlook is linked to growth prospects
of the IT sector (which in turn is dependent on the US and EU market) and
(b) delayed launches of the guided pipeline.
 Valuation and view: PEPL trades at 1.1x FY13E BV, 8.5x FY13E EPS of
INR10.6 and a 50% discount to NAV. Maintain Buy

UBS:: Prestige Estates - Good Q1; best proxy to Bangalore growth

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UBS Investment Research
Prestige Estates Projects
G ood Q1; best proxy to Bangalore growth
􀂄 Event: 1Q earnings beat UBS estimates, Operationally a good qtr
Q1 earnings of Rs364mn grew 46% YoY and 9% QoQ primarily driven by 1)
better than expected EBITDA margin of 27.7% (vs. our 24%) 2) lower interest
costs and 3) higher other income. Revenues however declined 8% QoQ more due
to revenue recognition mismatch. Consol net debt at 11.98bn (vs. 11.5bn in
4QFY11) with D/E at 0.5x. Operationally, pre-sales grew 11% QoQ to 0.46msf;
leasing was steady at 0.48msf (portfolio at 4.28msf); and launched residential
projects of 5.4msf and a mall in Mysore of 0.54msf.
􀂄 Impact: Maintain our 39% CAGR growth through FY12-14E
We expect strong revenue growth in 2H on higher recognition of high-value
projects and thus maintain our 39% earnings CAGR for FY11-FY14E. We expect
growing rental annuity, healthy pre-sales and execution pickup to drive earnings.
􀂄 Action: Reiterate Buy rating; good pre-sales & execution the catalyst
We see 1) strong response to its mid-income housing launches (10-12msf) over
next 9 mts; 2) 30%-plus growth in rentals in FY12E and 3) encouraging execution
for ongoing projects (47% of NAV). Key risks are 1) relatively high exposure to
luxury housing 2) oversupply in pockets of Bangalore e.g Whitefield.
􀂄 Valuation: Attractive at 52% discount to NAV
With stock trading at 1) 52% disc to base NAV of Rs 275 and 2) 31% disc to bear
case NAV of Rs 194, we see deep value here. We believe Prestige provides the
best exposure to Bangalore’s growth (84% of NAV), amongst the most promising
real estate market in India from demand perspective, in our view. Our price target
of Rs205 is based on a 25% discount to our FY11E NAV/share of Rs275


􀁑 Prestige Estates Projects
Prestige Estates Projects (Prestige) is a South India-focused real estate developer
with a diversified real estate portfolio in residential, commercial, retail, and
hospitality. Most of its developable area is in Bangalore (84%) and it is now
expanding to other South Indian cities. Prestige also provides allied services,
such as interior design, property management services, and sub-letting services.
Established 24 years ago, Prestige has developed a number of landmark
properties in Bangalore, including UB City, Prestige Shantiniketan, and the
Forum Mall.
􀁑 Statement of Risk
Risks to Prestige are a high exposure to high-end/luxury projects, high exposure
to Bangalore and a decline in commercial leasing and activity and regulatory
policy risks

UBS :: Prestige Estates Projects - Good Q1; best proxy to Bangalore growth

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UBS Investment Research
Prestige Estates Projects
G ood Q1; best proxy to Bangalore growth
􀂄 Event: 1Q earnings beat UBS estimates, Operationally a good qtr
Q1 earnings of Rs364mn grew 46% YoY and 9% QoQ primarily driven by 1)
better than expected EBITDA margin of 27.7% (vs. our 24%) 2) lower interest
costs and 3) higher other income. Revenues however declined 8% QoQ more due
to revenue recognition mismatch. Consol net debt at 11.98bn (vs. 11.5bn in
4QFY11) with D/E at 0.5x. Operationally, pre-sales grew 11% QoQ to 0.46msf;
leasing was steady at 0.48msf (portfolio at 4.28msf); and launched residential
projects of 5.4msf and a mall in Mysore of 0.54msf.
􀂄 Impact: Maintain our 39% CAGR growth through FY12-14E
We expect strong revenue growth in 2H on higher recognition of high-value
projects and thus maintain our 39% earnings CAGR for FY11-FY14E. We expect
growing rental annuity, healthy pre-sales and execution pickup to drive earnings.
􀂄 Action: Reiterate Buy rating; good pre-sales & execution the catalyst
We see 1) strong response to its mid-income housing launches (10-12msf) over
next 9 mts; 2) 30%-plus growth in rentals in FY12E and 3) encouraging execution
for ongoing projects (47% of NAV). Key risks are 1) relatively high exposure to
luxury housing 2) oversupply in pockets of Bangalore e.g Whitefield.
􀂄 Valuation: Attractive at 52% discount to NAV
With stock trading at 1) 52% disc to base NAV of Rs 275 and 2) 31% disc to bear
case NAV of Rs 194, we see deep value here. We believe Prestige provides the
best exposure to Bangalore’s growth (84% of NAV), amongst the most promising
real estate market in India from demand perspective, in our view. Our price target
of Rs205 is based on a 25% discount to our FY11E NAV/share of Rs275.


􀁑 Prestige Estates Projects
Prestige Estates Projects (Prestige) is a South India-focused real estate developer
with a diversified real estate portfolio in residential, commercial, retail, and
hospitality. Most of its developable area is in Bangalore (84%) and it is now
expanding to other South Indian cities. Prestige also provides allied services,
such as interior design, property management services, and sub-letting services.
Established 24 years ago, Prestige has developed a number of landmark
properties in Bangalore, including UB City, Prestige Shantiniketan, and the
Forum Mall.
􀁑 Statement of Risk
Risks to Prestige are a high exposure to high-end/luxury projects, high exposure
to Bangalore and a decline in commercial leasing and activity and regulatory
policy risks