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Unitech's 1Q revenues (-28% yoy), EBITDA margins (-1535bps yoy) and PAT (-45% yoy) were
disappointing. While sales booking of Rs10bn (-21% yoy, +5% qoq) amidst weak market
conditions was a positive, we expect Unitech to revise its FY12 sales guidance downwards. Net
debt & debtors remained largely stable.
Muted 1Q12 revenues coupled with weak EBITDA margins
Unitech reported 1Q12 revenues of Rs5.96bn (-28% yoy), 10% below our forecasts.
(Bloomberg consensus estimate was Rs8.2bn) as the contribution from past projects
(launched before Mar2009) reduced to less than 15%. The real estate segment contributed
85% (Rs5.04bn) of total revenues in-line with the revenue contribution in 1Q12.
EBITDA declined 59% yoy to Rs1.2bn. EBITDA margin contracted 1535bps yoy to 20.1% (vs.
our estimate of 31.5%) due to lower EBITDA margin of 26% in 1Q12 vs 43% seen in 1Q11
from real estate segment (contributing 85% of revenues). Increase in staff costs to Rs363m
(47% yoy) and Rs 300m towards provision for diminution in treasury investments also led to
lower margins
The higher than expected other income of Rs714m (with Rs 500m from the sale of retail
development asset in Gurgaon) marginally helped support the company’s profitability.
Unitech reported PAT of Rs1bn (-45% yoy) vs. our estimate of Rs1.4bn and consensus
estimate of Rs1.5bn.
Balance Sheet and cashflow highlights – marginal improvement
In 1Q12, while Unitech's gross debt reduced by Rs2bn, the decline in net debt was only
Rs700m. This marginal debt reduction coupled with increase in net worth has helped to
reduce its net gearing from 47% at the end of FY11 to 44% as of June 30, 2011.
After a 69% yoy increase in Sundry debtors in FY11, it increased by only 1% qoq to
Rs21.8bn. Management seems to have set tighter control measures now on debtors after
auditor’s observations regarding inadequate provisions against non realisation of receivables
seen in FY11 notes to accounts. We also note that inventory increased marginally by 4% to
Rs200bn.
Company indicates cash flow generation of Rs8bn from operations, of which Rs3.5bn was
towards construction, Rs1.5bn towards interest payment, Rs1.25bn towards SG&A (including
staff costs) and Rs500m towards tax expenses. It repaid Rs2bn of debt of which Rs700m was
from cashflow generated from operations.
Operational highlights –mixed bag
Unitech booked sales of 1.9msf, lower than 3msf sales booked in 1Q11 and 2msf sales
booked in 4Q11. The company booked sales at an average realization of Rs5,361/sqft
amounting to Rs10.2bn (vs. Rs13bn in 1Q11 and Rs9.8bn in 4Q11).
While residential sales bookings (from Gurgaon, Chennai, Noida, Kolkata, etc) of 1.66msf
valued at Rs7.25bn contributed 71% of total sales booked, non-residential sales bookings
(from retail mall development and commercial office in Gurgaon) of 0.24msf were valued at
Rs3bn (at an average realization of Rs12,293/sqft) accounted for the remaining.
While sales booking of Rs10bn (-21% yoy, +5% qoq) amidst weak market conditions was a
positive, we expect Unitech to revise its FY12 sales guidance of Rs50bn downwards given
the rising interest rate environment.
Unitech launched 3.2msf during the quarter as against 2.8msf in 1Q11 and 4.3msf in 4Q11. In
this quarter, Gurgaon (Unitech’s main focus area) witnessed lower launches of 0.3msf as
against 1.4msf in 4Q11 and 1.5msf in1Q11. However we would see the contribution
increasing from Gurgaon from 2QFY12 onwards due to its launch of independent floors
during the current quarter.
The NCR region continues to remain Unitech’s forte contributing 54% of the total sales
booked for the quarter.
The company project deliveries improved to 1.6msf (vs. 0.9msf in 1Q11 and 1.3msf in 4Q11).
In this quarter, Unitech started handing over projects (0.2msf) which were launched since
March 2011 and even handed over 0.7msf of leased area.
The area still pending for delivery still remains high at 31.1msf with 12.2msf from past projects
(launched before March 2009) and 18.9msf from projects launched since March 2009.
Telenor update: status quo
Unitech states there has been no update from the court in terms of determining the date of
hearing with respect to its MD getting bail and further clarified that the ongoing telecom matter
pertains to Unitech Wireless Tamilnadu Pvt. Ltd. (Uninor), which is a separate legal entity
engaged in the telecom business, and will not impact Unitech Limited (the real estate
company).
We believe collateral damage risk persists; maintain Sell
Our current target price of Rs30/share is based on Rs30/sh (post 40% execution risk
discount) for its real estate business as we currently ascribe no value to Unitech’s 32.75%
stake in Uninor. We believe collateral damage risk due to the telecom overhang persists.
Maintain Sell
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Unitech's 1Q revenues (-28% yoy), EBITDA margins (-1535bps yoy) and PAT (-45% yoy) were
disappointing. While sales booking of Rs10bn (-21% yoy, +5% qoq) amidst weak market
conditions was a positive, we expect Unitech to revise its FY12 sales guidance downwards. Net
debt & debtors remained largely stable.
Muted 1Q12 revenues coupled with weak EBITDA margins
Unitech reported 1Q12 revenues of Rs5.96bn (-28% yoy), 10% below our forecasts.
(Bloomberg consensus estimate was Rs8.2bn) as the contribution from past projects
(launched before Mar2009) reduced to less than 15%. The real estate segment contributed
85% (Rs5.04bn) of total revenues in-line with the revenue contribution in 1Q12.
EBITDA declined 59% yoy to Rs1.2bn. EBITDA margin contracted 1535bps yoy to 20.1% (vs.
our estimate of 31.5%) due to lower EBITDA margin of 26% in 1Q12 vs 43% seen in 1Q11
from real estate segment (contributing 85% of revenues). Increase in staff costs to Rs363m
(47% yoy) and Rs 300m towards provision for diminution in treasury investments also led to
lower margins
The higher than expected other income of Rs714m (with Rs 500m from the sale of retail
development asset in Gurgaon) marginally helped support the company’s profitability.
Unitech reported PAT of Rs1bn (-45% yoy) vs. our estimate of Rs1.4bn and consensus
estimate of Rs1.5bn.
Balance Sheet and cashflow highlights – marginal improvement
In 1Q12, while Unitech's gross debt reduced by Rs2bn, the decline in net debt was only
Rs700m. This marginal debt reduction coupled with increase in net worth has helped to
reduce its net gearing from 47% at the end of FY11 to 44% as of June 30, 2011.
After a 69% yoy increase in Sundry debtors in FY11, it increased by only 1% qoq to
Rs21.8bn. Management seems to have set tighter control measures now on debtors after
auditor’s observations regarding inadequate provisions against non realisation of receivables
seen in FY11 notes to accounts. We also note that inventory increased marginally by 4% to
Rs200bn.
Company indicates cash flow generation of Rs8bn from operations, of which Rs3.5bn was
towards construction, Rs1.5bn towards interest payment, Rs1.25bn towards SG&A (including
staff costs) and Rs500m towards tax expenses. It repaid Rs2bn of debt of which Rs700m was
from cashflow generated from operations.
Operational highlights –mixed bag
Unitech booked sales of 1.9msf, lower than 3msf sales booked in 1Q11 and 2msf sales
booked in 4Q11. The company booked sales at an average realization of Rs5,361/sqft
amounting to Rs10.2bn (vs. Rs13bn in 1Q11 and Rs9.8bn in 4Q11).
While residential sales bookings (from Gurgaon, Chennai, Noida, Kolkata, etc) of 1.66msf
valued at Rs7.25bn contributed 71% of total sales booked, non-residential sales bookings
(from retail mall development and commercial office in Gurgaon) of 0.24msf were valued at
Rs3bn (at an average realization of Rs12,293/sqft) accounted for the remaining.
While sales booking of Rs10bn (-21% yoy, +5% qoq) amidst weak market conditions was a
positive, we expect Unitech to revise its FY12 sales guidance of Rs50bn downwards given
the rising interest rate environment.
Unitech launched 3.2msf during the quarter as against 2.8msf in 1Q11 and 4.3msf in 4Q11. In
this quarter, Gurgaon (Unitech’s main focus area) witnessed lower launches of 0.3msf as
against 1.4msf in 4Q11 and 1.5msf in1Q11. However we would see the contribution
increasing from Gurgaon from 2QFY12 onwards due to its launch of independent floors
during the current quarter.
The NCR region continues to remain Unitech’s forte contributing 54% of the total sales
booked for the quarter.
The company project deliveries improved to 1.6msf (vs. 0.9msf in 1Q11 and 1.3msf in 4Q11).
In this quarter, Unitech started handing over projects (0.2msf) which were launched since
March 2011 and even handed over 0.7msf of leased area.
The area still pending for delivery still remains high at 31.1msf with 12.2msf from past projects
(launched before March 2009) and 18.9msf from projects launched since March 2009.
Telenor update: status quo
Unitech states there has been no update from the court in terms of determining the date of
hearing with respect to its MD getting bail and further clarified that the ongoing telecom matter
pertains to Unitech Wireless Tamilnadu Pvt. Ltd. (Uninor), which is a separate legal entity
engaged in the telecom business, and will not impact Unitech Limited (the real estate
company).
We believe collateral damage risk persists; maintain Sell
Our current target price of Rs30/share is based on Rs30/sh (post 40% execution risk
discount) for its real estate business as we currently ascribe no value to Unitech’s 32.75%
stake in Uninor. We believe collateral damage risk due to the telecom overhang persists.
Maintain Sell
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