Prestige Estates Projects Ltd. share price target

Prestige Estates Projects (PEPL) reported Q1FY23 gross sales bookings of Rs30.1bn vs. I-sec estimate of Rs31.5bn and was primarily led by strong response to the new launch in Mulund, Mumbai (Prestige Bellanza) which our channel checks indicate may have sold ~300 units or Rs6.0bn in value during the quarter.

Prestige Estates Projects (PEPL) has reported 90% YoY growth in FY22 gross sales bookings to Rs103.8bn led by record new launches of 16.8msf in South India. As per PEPL management, the company has done an official launch of three Mumbai projects (Mulund/Byculla/Bandra) spread across 8msf in May’22 which have met with strong response and with large planned launches in Noida/Chennai in FY23.

The management stated that 1QFY22 will be a lockdown quarter. It highlighted that efforts from the company's sales team towards selling units digitally are in full swing and it remains optimistic about recovery in demand. Cash flows remained healthy at Rs.1,767.6 cr, up 32.0% YoY in 4QFY21....

one of the largest real estate developers in India. PEPL has delivered 247 world-class projects spanning 134 mn sqft, predominantly in South India and is now expanding to other geographical regions. Currently PEPL...

PEPL is going all out (1) On building lease assets & (2) Increasing Non-South exposure with JV/JD tie ups. It's banking on the consolidation theme and picking up distressed projects in non-south markets. Large capex outlays on new lease assets will be cash flow dilutive over next 3-4yrs and requires timely funding from existing lease assets monetization and deployment of capital in cash flow dilutive under construction projects. Office assets under construction/upcoming launches of 15/25mn sqft are aggressive with overall office portfolio expected to increase from 10mn sqft to 50mn sqft over next 5-6yrs. We retain NEU with increased (new leases addition) TP of Rs 358/sh. We maintain NEU on PEPL with SOTP of Rs 358/sh (vs. Rs 348/sh earlier). We have increased our FY20/21E EPS estimates by 35%/18.9% to factor in better than expected deliveries in residential projects. PEPL posted strong 3QFY20 results.

Despite an encouraging quarter on collections, PEPL has seen further debt built up (due to asset portfolio stake consolidation), posing a challenge for the management in achieving optimal leverage. Further pending capex includes Rs 13bn/4-5bn for Office and Retail/ Hospitality respectively. One of the few positives is that ~60% of debt is backed either by annuity or by rental securitization/ bill discounting. Launches were largely tilted towards commercial projects. Asset stake sale is key for further re-rating. Retain NEU with Rs 286/sh TP. We maintain NEU on Prestige Estate (PEPL) owing to muted presales, increasing debt and limited visibility on asset monetization. Our SOTP based TP is Rs 286/sh. We remain constructive on leasing business and cap rate compression in declining interest rate scenario will cap valuation downside.

Despite strong pre- sales, Prestige has seen debt building up. Further pending capex includes Rs 15/3bn for Office and Retail/ Hospitality respectively. With ~Rs 7.5-10bn outlay expected over the next 12-15 months on JDAs/ JVs, we remain concerned. The only solace is ~56% of debt is backed either by annuity or by rental securitization/ bill discounting. The stock has run up 39% over the past 3 months. Maintain NEU with TP of Rs 286/sh. Key risks (1) Further increase in debt, (2) Delays in asset monetization, (3) High unsold inventory We maintain NEU owing to rich valuations. Our SOTP based TP stands reduced to Rs 286/sh (vs Rs 292 earlier). We have reduced FY20/21E EPS by 27/17% to factor in higher depreciation on asset capex and higher financing costs.

Monetisation of completed inventory of ~Rs 28bn remains key. We maintain BUY with Rs 292/sh TP. 3QFY19 Revenue came in at Rs 10.8bn, Rs 1bn lower due to IND AS 115. Margins came in at 31.9% (vs 20.0/27.7% YoY/QoQ). PEPL had deliveries of 7mn sqft in 3QFY19 alone (record deliveries of ~24mn sqft in 9MFY19, 141% ahead of full year guidance) leading to total unrecognized revenue of ~130bn, incl. ~Rs 75bn of earlier reversals (re-recognition over 2.5-3 years).

We maintain BUY with Rs 309/sh TP PEPL reported 2QFY19 revenue of Rs 13.2bn, 49% ahead of estimates. APAT came in at Rs 968mn (234% ahead of estimates). Impact of IND AS 115: higher revenue by Rs ~1.3bn and higher net profit by Rs 543mn. PEPL delivered 12.1mn sqft in 2QFY19 alone (~17.1mn sqft in 1HFY19, which is 71% ahead of guidance and this has resulted in strong revenue recognition).

Due to the recent price correction, we upgrade PEPL from NEU to BUY with a NAV-based TP of Rs 316/sh. 1QFY19 Revenue came in at Rs 8.6bn. The prior quarters are not comparable due to 1st time adoption of IND AS 115. Impact (1QFY19): Lower revenue by Rs 1.7bn and higher net profit by Rs 23mn). Even as 1mn sqft was launched in 1QFY19 in Chennai and Bangalore, PEPLs share of pre-sales decreased QoQ to 1.1mn sqft (vs 1.6mn sqft QoQ).