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Revenues and PAT ahead of estimates
Anant Raj Industries (Anant Raj) reported revenues of 1,329 mn, ahead of our
estimate of INR 811 mn, mainly on account of a sale of investment of INR 240
mn. Revenue break-up for the quarter (ex-investment sale) consists of ~INR
630 mn from Manesar (35% PoCM) and INR 230 mn from Kapashera residential
projects (65% PoCM in H1FY11) and rental income of INR 187 mn (our estimate
was INR 185 mn). Reported EBITDA margin of 47% was 800bps lower Q-o-Q,
mainly on account of low margins generated from investment sale (INR 40 mn of
EBITDA contribution) and lower margins on Manesar project (~40%).
New residential launches on the anvil in H2FY11
Anant Raj has been actively pursuing land acquisitions in CY10 and expects to
launch two more residential projects over the next six-nine months at Sec-91
Gurgaon (15.5 acre land parcel acquired for ~INR 0.9 bn, with saleable area of
1.2 msf) and Neemrana in Rajasthan (18 acre land parcel acquired for ~INR 130
mn with saleable area of ~2 msf). However, we have not factored these
launches in our estimates. Launch of these projects, along with Hauz Khas,
Delhi, may act as positive triggers for the stock.
Rental revenues to post growth in FY12
We estimate Anant Raj to generate ~INR 0.9 bn of rental income in FY11 and
expect this to grow to ~INR 1.4 bn, primarily driven by launch of Kirti Nagar mall
project (~50% of 0.75 msf leased currently), and fresh leasing at Manesar SEZ
(0.3 msf yielding rentals and advanced stages of negotiation on for an additional
~0.2 msf) and Tricolor (Delhi) and Hilton (Manesar) hotels. Additionally, phase I
of Rai SEZ is expected to be completed in H1FY12.
Outlook and valuation: On track; maintain ‘BUY’
We have factored in slippages from delay in launch of Hauz Khas and
Bhagwandas Road projects, assuming their launch in FY12E (presenting upside
risk to our revenue and profit estimates). We have also factored in delays in
leasing of the IT Park at Manesar and Rai SEZ, Haryana. We maintain our SOTP
NAV estimate for ARIL at INR 242/share. We maintain ‘BUY/Sector
Outperformer’ recommendation on the stock.
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