Weak P&L: 1QFY17 Consolidated P&L weakened sequentially with revenue at INR9.5b (v/s INR9.6b QoQ), EBITDA at INR1.7b (OPM of 18.1%) v/s INR2.5b (OPM of 26.4%) in 4Q and PAT at INR478m (v/s INR723m). Gearing marginally went down by INR1b QoQ to INR55.8b (net DER of 1.13x). Subnormal presales: Quarterly pre-sales remained subdued at 0.8msf (INR 5.1b) v/s 1.5msf (INR9.9b) in 4Q. Collections up 16%QoQ in 1Q. Leasing and rental runrate was down 1Q, at 0.04msf and INR1.312b respectively. Moderate growth outlook: FY17 guidance comprises 15-25% growth in pre- sales, 10% in collections, 30%-35% in rentals on the back of new completions, and gearing at elevated level of 1-1.25x as capes cycle would continue.

PEPL remains preferred play on Bangalore real estate, which albeit lost momentum, still offers better dynamics. But PEPL’s massive slippage over FY16 (contrary to track record) highlights the magnitude of prevailing weakness in market. Post sharp corrections, stock valuations factor in the concerns of deterioration in capital structure and weakness in operations. At 1.7x/1.6x FY17/18E BV and at an EV of 10x FY18E EBITDA stock offers valuation comfort. Operational normalcy remains near-term trigger. We maintain Buy with target price of INR225.