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Orbit Corp.
Launches and sales continue; Mandhwa launched; Buy
2QFY11 results. Orbit witnessed sales of `2.3bn for 0.16m sqft in
2QFY11 vs. 0.05m sqft in 1Q, mainly due to the launch at Mandhwa.
While revenue recognition was low for older projects nearing
completion, new launches have yet to start construction. We maintain
Buy with Sep ’11e target of `181/share.
Revenue decline. Revenue fell 31% qoq for older projects nearing
completion and as work on new launches has yet to gather pace.
Margin improvement was due to higher realization. Slow money
recovery from new sales and higher outgo led to a slight increase in
net D/E, which now stands at 1x (0.61x excluding compulsory
convertible debentures-CCDs).
New project launches continue; existing sales slow. Orbit softlaunched/
launched the first phase of Mandhwa (selling 0.1m sqft at
`8,500/sqft) and Orbit Enclave in South-Central Mumbai. Excluding
new launches, blended average realizations improved ~20% to
`25,390/sqft, but sales declined 18% qoq. In its investor release, Orbit
has indicated a price correction of ~15% in South-Central Mumbai
Receivables. Orbit has receivables of `12.3bn from sales, as of 30
Sep ’10. Recovery from projects under construction is decent; but,
from projects launched in CY10 it is low, given that construction has
yet to commence. We see cash flow from such projects, too, picking
up in subsequent quarters after construction starts.
Valuation. We retain our Sep ’11e target of `181. At the CMP, the
stock trades at 1.1x FY11e P/BV. Risk: slowdown in sales and
execution.
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