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HDIL's Q1 FY12 earnings and revenue were steady:
revenue grew 14% yoy to Rs5bn and earnings declined
12% yoy to Rs1.9bn primarily due to higher taxes.
FSI sales were healthy at Rs3.5bn; we expect HDIL to
maintain the run-rate.
TDR sales were low at Rs1.7bn (0.65m sq ft vs 1m sq
ft/qtr in FY11): projects worth Rs17bn sales could start
contributing by Q4 FY12, offsetting the reduction in
TDR sales.
HDIL is progressing well on its sales and debt reduction
target. Maintain OUTPERFORM.
Resilience shows. HDIL’s Q1 FY12 numbers were
encouraging given the tough environment. Revenue grew
12% yoy to Rs5.1bn, but EBITDA was flat at Rs2.9bn and
earnings fell to Rs1.9bn due to higher taxes. Higher taxes
were due to changed revenue mix with Rs3.3bn contributed
by FSI sales attracting full tax rate. EBITDA margin was in
line with expectation at 57%.
Good FSI sale. HDIL booked Rs3.3bn in FSI sales from the
Popular car bazaar in Q1 FY12 (transaction completed). For
FY12 revenue contribution could come from sold FSI of
Rs6.7bn in the Goregaon project and another 15-20m sq ft
of FSI sales in Vasai-Virar (at price of Rs800-1,000/ sq ft).
TDR pipeline shrinking. HDIL’s TDR sales were the lowest
in the past 9 quarters at 0.65m sq ft (Rs1.74bn) due to lack
of clarity on the Mumbai airport project. TDR inventory is
also low (0.5m sq ft), however, the company expects to
generate 3-5m sq ft of additional TDRs on completion of the
ongoing resettlement projects.
Residential projects may contribute from Q4 FY12. Four
projects worth Rs17bn might contribute to revenue from Q4
FY12: Galaxy, Metropolis, Premier (residential) and Virar
industrial park. HDIL launched Whispering Woods phase II
project (0.8m sq ft) in this quarter.
Balance sheet discipline to pay off. HDIL continues to
focus on attaining balance sheet discipline: managed to
reduce debt by Rs4.5bn in FY12 YTD (it expects another
Rs5bn reduction by Q4 FY12). Current valuations (P/E 5.4x
and P/B of 0.5x) do not factor in these positives. Our PT of
Rs250 is a 35% discount to NAV; maintain OUTPERFORM.
Conference call highlights
Our key takeaway from HDIL’s conference call was that its operating environment in the FSI/TDR
and residential unit space was challenging due to regulatory uncertainties. But HDIL’s operational
performance continued to show the company’s commitment towards generating business
volumes, speedy cash flow turnaround and debt reduction. Key highlights of the results and
conference call:
Uncertainty on FSI regulations to impact TDR/FSI market. HDIL expects the uncertainty
surrounding the new FSI regulations in Mumbai to adversely impact the TDR and FSI markets
in Mumbai. However, the company is more positive on FSI markets in the extended MMR
markets such as Vasai, Panvel and Palghar. In the Mumbai market, despite the weak markets
the company managed to maintain TDR price of Rs2,500/sq ft. Furthermore, it has benefited
from increase in FSI from 0.5 to 1 in Palghar & Poisar projects.
MIAL project uncertainty impacts TDR stock. HDIL currently has a stock of only 0.5m sq ft
of TDRs remaining from the MIAL project. Given the lack of clarity on the eligibility criterion for
allotment of tenements to slum dwellers, the movement to the new constructed units has been
slow. HDIL will not be able to receive further TDRs due to it from this phase. HDIL expects to
receive an additional 3-5m sq ft of TDRs for completion of ongoing rehabilitation units over the
next few quarters.
Project launch in Q1 FY12. HDIL launched 0.8m sq ft of Whispering Woods phase II project
in Mulund in Q1 FY12 at Rs7,550/sq ft and managed to sell about 10% of the units. Given the
tough sales environment, we believe that this is quite encouraging. It is looking to launch
projects in Shahad and Panvel in the coming months.
Debt reduction progressing well. HDIL reduced its net debt by about 10% or Rs4.5bn YTD
in FY12 (Rs1.4bn in Q1 FY12 and Rs3.1bn in July). It has been trying to bring down its cost of
debt by reducing higher interest rate near term debt with longer term NCDs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDIL's Q1 FY12 earnings and revenue were steady:
revenue grew 14% yoy to Rs5bn and earnings declined
12% yoy to Rs1.9bn primarily due to higher taxes.
FSI sales were healthy at Rs3.5bn; we expect HDIL to
maintain the run-rate.
TDR sales were low at Rs1.7bn (0.65m sq ft vs 1m sq
ft/qtr in FY11): projects worth Rs17bn sales could start
contributing by Q4 FY12, offsetting the reduction in
TDR sales.
HDIL is progressing well on its sales and debt reduction
target. Maintain OUTPERFORM.
Resilience shows. HDIL’s Q1 FY12 numbers were
encouraging given the tough environment. Revenue grew
12% yoy to Rs5.1bn, but EBITDA was flat at Rs2.9bn and
earnings fell to Rs1.9bn due to higher taxes. Higher taxes
were due to changed revenue mix with Rs3.3bn contributed
by FSI sales attracting full tax rate. EBITDA margin was in
line with expectation at 57%.
Good FSI sale. HDIL booked Rs3.3bn in FSI sales from the
Popular car bazaar in Q1 FY12 (transaction completed). For
FY12 revenue contribution could come from sold FSI of
Rs6.7bn in the Goregaon project and another 15-20m sq ft
of FSI sales in Vasai-Virar (at price of Rs800-1,000/ sq ft).
TDR pipeline shrinking. HDIL’s TDR sales were the lowest
in the past 9 quarters at 0.65m sq ft (Rs1.74bn) due to lack
of clarity on the Mumbai airport project. TDR inventory is
also low (0.5m sq ft), however, the company expects to
generate 3-5m sq ft of additional TDRs on completion of the
ongoing resettlement projects.
Residential projects may contribute from Q4 FY12. Four
projects worth Rs17bn might contribute to revenue from Q4
FY12: Galaxy, Metropolis, Premier (residential) and Virar
industrial park. HDIL launched Whispering Woods phase II
project (0.8m sq ft) in this quarter.
Balance sheet discipline to pay off. HDIL continues to
focus on attaining balance sheet discipline: managed to
reduce debt by Rs4.5bn in FY12 YTD (it expects another
Rs5bn reduction by Q4 FY12). Current valuations (P/E 5.4x
and P/B of 0.5x) do not factor in these positives. Our PT of
Rs250 is a 35% discount to NAV; maintain OUTPERFORM.
Conference call highlights
Our key takeaway from HDIL’s conference call was that its operating environment in the FSI/TDR
and residential unit space was challenging due to regulatory uncertainties. But HDIL’s operational
performance continued to show the company’s commitment towards generating business
volumes, speedy cash flow turnaround and debt reduction. Key highlights of the results and
conference call:
Uncertainty on FSI regulations to impact TDR/FSI market. HDIL expects the uncertainty
surrounding the new FSI regulations in Mumbai to adversely impact the TDR and FSI markets
in Mumbai. However, the company is more positive on FSI markets in the extended MMR
markets such as Vasai, Panvel and Palghar. In the Mumbai market, despite the weak markets
the company managed to maintain TDR price of Rs2,500/sq ft. Furthermore, it has benefited
from increase in FSI from 0.5 to 1 in Palghar & Poisar projects.
MIAL project uncertainty impacts TDR stock. HDIL currently has a stock of only 0.5m sq ft
of TDRs remaining from the MIAL project. Given the lack of clarity on the eligibility criterion for
allotment of tenements to slum dwellers, the movement to the new constructed units has been
slow. HDIL will not be able to receive further TDRs due to it from this phase. HDIL expects to
receive an additional 3-5m sq ft of TDRs for completion of ongoing rehabilitation units over the
next few quarters.
Project launch in Q1 FY12. HDIL launched 0.8m sq ft of Whispering Woods phase II project
in Mulund in Q1 FY12 at Rs7,550/sq ft and managed to sell about 10% of the units. Given the
tough sales environment, we believe that this is quite encouraging. It is looking to launch
projects in Shahad and Panvel in the coming months.
Debt reduction progressing well. HDIL reduced its net debt by about 10% or Rs4.5bn YTD
in FY12 (Rs1.4bn in Q1 FY12 and Rs3.1bn in July). It has been trying to bring down its cost of
debt by reducing higher interest rate near term debt with longer term NCDs.
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