Orbit Corporation - steady quarter; gain momentum; Buy:: Edelweiss

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􀂃 Revenues and PAT below estimates
Orbit Corporation (Orbit) reported Q2FY11 net revenues of INR 977 mn (down
31% Y-o-Y and 18% Q-o-Q), lower than our estimate of INR 1,230 mn, as
project execution was hampered by heavy monsoon in Mumbai. Reported
EBITDA came in at INR 502 mn, with EBITDA margin of ~51% against 44% in
Q1FY11. Rise in margins was owing to a larger portion of revenues arising from
the high-margin ‘Orbit Haven’ and ‘Orbit Terraces’ projects. However, PAT at INR
160 mn (our estimate was INR 246 mn) and PAT margin of ~16% were flat Q-o-
Q.



􀂃 Sales momentum returns with launch of Mandwa project
Orbit achieved fresh sales of 157,917 sft worth INR 2,291 mn during the quarter
against ~54,000 sft in Q1FY11 and ~125,000 sft in Q4FY10. The launch of
Mandwa project has seen decent response with sales of 102,800 sft at average
price of ~INR 8,500 during the quarter. Realisations improved Q-o-Q with sales
rising 14% Q-o-Q in the Nana Chowk/Gamdevi projects and ~8% in Lower Parel.
The company’s total outstanding order book now stands at INR 8,493 mn.

􀂃 Debt increases marginally; cash flow to pick-up in H2FY11
With lower collections of INR 387 mn from customers this quarter, gross debt
(ex-CCDs) increased marginally to ~INR 7 bn. Although execution in Q2FY11
was sluggish due to heavy monsoons, Orbit expects it to pick-up in H2FY11 with
the ‘Orbit WTC’ project set to complete in FY11 and Mandwa project breaking
ground in terms of execution, which are key positives.

􀂃 Outlook and valuation: Attractively priced; maintain ‘BUY’
We continue to like Orbit’s conservative pricing strategy and possible upsides
from the expected increase in FSI at Napean Sea Road project (‘Orbit Magnum’),
Lalbaug (‘Orbit Mid-Town’), and further land acquisition at Mandwa project. We
are yet to consider value accretion from the proposed acquisition of Kilachand
House project at Napean Sea Road on account of lack of clarity on the same. Our
current NAV estimate for Orbit stands at INR 181/share. We maintain ‘BUY’ on
the stock and rate it ‘Sector Outperformer’ on relative returns.