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Puravankara Projects (PVKP)
Property
Demand pick-up visible. PVKP reported 2QFY11 revenues of Rs1.5 bn (+132% yoy
adjusting for land sales in 2QFY10, +11% above estimates) but EBITDA of Rs387 mn
(+38% yoy) which is 10% lower than our estimate. PVKP has sold 1.1 mn sq. ft in
2QFY11 which is more than twice that of 1QFY11 and increases visibility of it achieving
its 3 mn sq. ft sales target for FY2011E. We maintain REDUCE with a target price Rs122
at a 20% discount to our estimated March 2012 NAV.
2QFY11 revenues above estimates but EBITDA lower than estimates
PVKP reported 2QFY11 revenues of Rs1.5 bn (+132% yoy after adjusting for land sales in 2QFY10,
+33% qoq) versus our estimate of Rs1.4 bn and an EBITDA of Rs387 mn (+38% yoy, 10% below
KIE estimate and -1% qoq).
1.1 mn sq. ft of volume sales in 2QFY11 is the most encouraging sign
Puravankara (including Provident low-cost housing) sold more than double the volume it sold in
1QFY11 - 1.1 mn sq ft in 2QFY11 (average realization Rs 2,768 / sq ft) vs. 0.43 mn sq ft in 1QFY11
(average realization of Rs 2,588 / sq ft). With this, Puravankara has pre-sold 65% of its area
launched which would mean a likely comfortable cash flow situation as customer milestone
payments would fund construction expenses. We believe this also (1) increases visibility of
Puravankara achieving its target of 3 mn sq. ft of sales in FY2011E and (2) reduces our concern on
increase in debt qoq.
PVKP currently has 11.7 mn sq. ft of projects under execution including 12 residential projects (8.6
mn sq. ft), two affordable housing projects (2.7 mn sq. ft) and two commercial projects (0.5 mn
sq. ft).
There were no new launches or handovers in this quarter. Ongoing projects are all South Indiafocused
except for Elita Garden Vista in Kolkata. Both the commercial projects are in Chennai. At
present 96% of their portfolio is residential including Provident, and PVKP intends to move
towards its long-term goal of 20-25% commercial projects once the commercial/leasing market
picks up.
Maintain REDUCE with a target price of Rs122
We maintain our REDUCE rating with a target price of Rs122. Our target price is based on a 20%
discount to March-2012E NAV of Rs152/share. We factor in discount of 20% to account for
continued mismatch between cash-flows and debt/interest servicing. Balance sheet improvement
will hinge on ability to generate operating cash flow or further equity fund raising, which in turn
will be dependent on the success of affordable housing projects.
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