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Unitech's 1QFY12 earnings of Rs984MM were sharply below our and
street expectations primarily due to low revenue recognition. UT's
quarterly revenues continue to lag the bookings run rate (Rs10B-
12B/quarter) implying slow execution on new projects. Presales (stable
Q/Q) and launch activity (8msf launched in YTD CY11) albeit fared
reasonably well. Importantly, company generated ~Rs1.5B of cash flows
(post interest and tax) during the Q. Even while the operational trends are
healthy and underlying land valuations for the co. remain intact; we think
until profit recognition accelerates from o/s order book (Rs93B pre sales
done in FY10/11), markets are unlikely to take note of the wide disconnect
between stock price and inherent land value (JPMe- Rs60/share).
Financial Highlights- 1] RE revenues at Rs5B (-28% Y/Y, -45% Y/Y)
were the lowest reported over the last 7 quarters; 2] RE margins in 1Q
stood at 26% vs. 17% in 4Q. For full year, company is guiding to 30%
margins under the RE segment; 3] Other income at Rs714MM in 1Q (vs.
Rs415M in 4Q) included sale of retail mall space in Gurgaon (0.1msf);
4] Net debt at Rs53.3B reduced marginally by Rs300M during the Q.
Operational Highlights- 1] 1Q new bookings at Rs10.2B (+5% Q/Q)
remain in line with FY11 quarterly run rate. Average realizations (at
Rs5,370psf) improved by 8% Q/Q due to contribution from commercial
sales (Rs3B); 2] Gurgaon accounted for ~40% of 1Q bookings vs. 60%
in FY11 with other geographies (Chennai/Tier 2 cities) picking up
incrementally; 3] Launch activity has been decent with co. launching
8msf of projects in CY11 (3.2msf in Jun-Q) while most other players are
reporting launch delays (primarily due to approvals); 4] 1.6msf of space
was delivered during the Q (vs. 1.3 msf in 4Q). Area under construction
is 31msf including 12 msf of old projects which are at advanced stages.
Estimate and PT changes – We revise down FY12 and FY13 estimates
by 35% and 27% respectively as an expected pick-up in revenue
recognition doesn’t seem to be flowing through. We also lower our
bookings for FY12 by ~10% to Rs38B and reduce margin assumptions.
Our Mar-12 PT is lowered to 40/share based on 10x normalized FCFE
which is in line with other residential developers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Unitech's 1QFY12 earnings of Rs984MM were sharply below our and
street expectations primarily due to low revenue recognition. UT's
quarterly revenues continue to lag the bookings run rate (Rs10B-
12B/quarter) implying slow execution on new projects. Presales (stable
Q/Q) and launch activity (8msf launched in YTD CY11) albeit fared
reasonably well. Importantly, company generated ~Rs1.5B of cash flows
(post interest and tax) during the Q. Even while the operational trends are
healthy and underlying land valuations for the co. remain intact; we think
until profit recognition accelerates from o/s order book (Rs93B pre sales
done in FY10/11), markets are unlikely to take note of the wide disconnect
between stock price and inherent land value (JPMe- Rs60/share).
Financial Highlights- 1] RE revenues at Rs5B (-28% Y/Y, -45% Y/Y)
were the lowest reported over the last 7 quarters; 2] RE margins in 1Q
stood at 26% vs. 17% in 4Q. For full year, company is guiding to 30%
margins under the RE segment; 3] Other income at Rs714MM in 1Q (vs.
Rs415M in 4Q) included sale of retail mall space in Gurgaon (0.1msf);
4] Net debt at Rs53.3B reduced marginally by Rs300M during the Q.
Operational Highlights- 1] 1Q new bookings at Rs10.2B (+5% Q/Q)
remain in line with FY11 quarterly run rate. Average realizations (at
Rs5,370psf) improved by 8% Q/Q due to contribution from commercial
sales (Rs3B); 2] Gurgaon accounted for ~40% of 1Q bookings vs. 60%
in FY11 with other geographies (Chennai/Tier 2 cities) picking up
incrementally; 3] Launch activity has been decent with co. launching
8msf of projects in CY11 (3.2msf in Jun-Q) while most other players are
reporting launch delays (primarily due to approvals); 4] 1.6msf of space
was delivered during the Q (vs. 1.3 msf in 4Q). Area under construction
is 31msf including 12 msf of old projects which are at advanced stages.
Estimate and PT changes – We revise down FY12 and FY13 estimates
by 35% and 27% respectively as an expected pick-up in revenue
recognition doesn’t seem to be flowing through. We also lower our
bookings for FY12 by ~10% to Rs38B and reduce margin assumptions.
Our Mar-12 PT is lowered to 40/share based on 10x normalized FCFE
which is in line with other residential developers.
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