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The top line and EBITDA margins were lower than expected due to disappointing sales bookings.
However, higher interest income and lower tax resulted in higher PAT. Weak sales volume and
the oversupply overhang remains, but the proposed IBPOW de-merger should be a positive
catalyst. We cut our estimates and TP.
Weak 1Q on slower momentum of sales booked and launch delays
Indiabulls Real Estate (IBREL) reported weak 1Q12 revenues of Rs2.4bn (+41% yoy on a low
base, -57% qoq) due to: 1) weakness in sales booked in its Panvel and Gurgaon locations, and 2)
delays in Navi Mumbai launches (Savroli). We are disappointed on the qoq decline as we had
expected sequential growth. The EBITDA margin was 12.4% vs 17.3% in 4Q, way below the
company’s FY12F guidance of 25%. This was however supported by higher other income
(interest income on liquid investments) of Rs1.4bn. The tax rate was even lower, at 23% vs
50.4% in 4Q. These resulted in PAT of Rs660m (+221% yoy, 462% qoq). IBREL’s net debt
increased by Rs11bn to Rs26bn (on account of IBPOW).
Proposed de-merger of power business might unlock value
IBREL’s board of directors in January 2011 approved the de-merger of Indiabulls Power
(IBPOW), in return for which IBREL’s shareholders would get 2.95 IBPOW shares for every share
held in IBREL. While this has now got shareholder approvals and secured and unsecured
creditors, final approval is awaited from the Delhi High Court, which management expects by
October-December 2011. We value the power business at Rs43/share at a 20% holding company
discount to IBPOW’s current stock price (see Table 4). However, IBREL’s recent plans to
evaluate a potential scheme of amalgamation of Indiabulls Infrastructure Development Limited
(IBIDL), a subsidiary of IBREL, having net worth of Rs10.45bn might change the de-merger ratio
if amalgamated.
Mumbai market continues to face headwinds (weak sales volumes and oversupply)
Prop Equity data indicates that the Mumbai property market (where IBREL is predominant)
continues to face headwinds in terms of weak sales volume oversupply (see Table 5).
We cut our target price 20% to Rs145 but maintain our Buy rating
In line with the above, we cut our FY12 and FY13 earnings estimates 27% and 17%, respectively.
As we attribute higher execution risk and increase our discount on GAV to 20% from 15%, our
SOTP based TP falls by 20% to Rs145: 1) Rs102/sh for real estate; and 2) Rs43/sh for the 58.6%
stake in IBPOW (at a 20% holding company discount to IBPOW's CMP).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The top line and EBITDA margins were lower than expected due to disappointing sales bookings.
However, higher interest income and lower tax resulted in higher PAT. Weak sales volume and
the oversupply overhang remains, but the proposed IBPOW de-merger should be a positive
catalyst. We cut our estimates and TP.
Weak 1Q on slower momentum of sales booked and launch delays
Indiabulls Real Estate (IBREL) reported weak 1Q12 revenues of Rs2.4bn (+41% yoy on a low
base, -57% qoq) due to: 1) weakness in sales booked in its Panvel and Gurgaon locations, and 2)
delays in Navi Mumbai launches (Savroli). We are disappointed on the qoq decline as we had
expected sequential growth. The EBITDA margin was 12.4% vs 17.3% in 4Q, way below the
company’s FY12F guidance of 25%. This was however supported by higher other income
(interest income on liquid investments) of Rs1.4bn. The tax rate was even lower, at 23% vs
50.4% in 4Q. These resulted in PAT of Rs660m (+221% yoy, 462% qoq). IBREL’s net debt
increased by Rs11bn to Rs26bn (on account of IBPOW).
Proposed de-merger of power business might unlock value
IBREL’s board of directors in January 2011 approved the de-merger of Indiabulls Power
(IBPOW), in return for which IBREL’s shareholders would get 2.95 IBPOW shares for every share
held in IBREL. While this has now got shareholder approvals and secured and unsecured
creditors, final approval is awaited from the Delhi High Court, which management expects by
October-December 2011. We value the power business at Rs43/share at a 20% holding company
discount to IBPOW’s current stock price (see Table 4). However, IBREL’s recent plans to
evaluate a potential scheme of amalgamation of Indiabulls Infrastructure Development Limited
(IBIDL), a subsidiary of IBREL, having net worth of Rs10.45bn might change the de-merger ratio
if amalgamated.
Mumbai market continues to face headwinds (weak sales volumes and oversupply)
Prop Equity data indicates that the Mumbai property market (where IBREL is predominant)
continues to face headwinds in terms of weak sales volume oversupply (see Table 5).
We cut our target price 20% to Rs145 but maintain our Buy rating
In line with the above, we cut our FY12 and FY13 earnings estimates 27% and 17%, respectively.
As we attribute higher execution risk and increase our discount on GAV to 20% from 15%, our
SOTP based TP falls by 20% to Rs145: 1) Rs102/sh for real estate; and 2) Rs43/sh for the 58.6%
stake in IBPOW (at a 20% holding company discount to IBPOW's CMP).
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