Brigade Enterprises Ltd. share price target

Brigade Enterprises Ltd. (BEL) is a leading real estate developer based in south India with exposure across residential, office, retail and hospitality segments.

Strong residential volumes growth; healthy launch pipeline The company indicated that one-third of volumes and ~| 330 crore worth of sales value (~35.7% of value) were from new project Brigade Citadel, Hyderabad (total saleable area of 0.75 msf) launched in Q3FY21. The company attributed its residential sales recovery to its right pricing/location, demand for completed and larger sized inventory as well as buyers' preference towards organised players. The company also guided for a robust traction ahead. Going ahead, BEL has a launch pipeline of 3.4 msf...

Brigade Enterprises (BRGD)'s Residential segment stole the show with the best ever performance seen in terms of presales in a quarter (1.53msf in volume / INR9.2b in value). Commercial Office Leasing held ground with steady rental collections (99%), and the Retail business continued to see marked improvement in performance. However, Hospitality's performance...

Momentum picks up in Residential: BRGD reported pre-sales of 0.99msf (down 1% YoY; up 135% QoQ), implying a booking value of INR5,760m (up 9% YoY; 130% QoQ) in 2QFY21. Average price realization was up 10% YoY to...

Commercial rental remained stable with rent collection at 98% in Q1FY21, while no new leasing was seen. In the operating lease portfolio, it has an active leasing pipeline of 0.8 msf, spread across Bengaluru (0.6 msf), Kochi (0.2 msf). Also, WTC Chennai (leasable area 2 msf of which 0.34 msf yet to be leased), BTG Bengaluru (leasable area 1.76 msf of which 1.55 msf yet to be leased) will start getting rentals from January 2021, Q3FY21, respectively. In terms of malls, footfall is at 20-25% of pre-Covid level. It has given 50% concession on rent during the lockdown period and lower minimum...

BEL has so far put up a strong performance across segments. However, we expect the impact on hospitality (likely to be a washout for at least a year with steep bottomline losses in FY21) and weak retail footfall in near term, to be a key area of concern. We also lower residential sales volumes estimates for FY21 to 2.2 msf vs. 4.3 msf, notwithstanding 5.3 msf projects launched in FY20 and further 2.7 msf in launch pipeline. Nonetheless, the company has comfortable debt-equity and sufficient liquidity from operational commercial assets to sustain the interim period pain. Hence, we...

19 June 2020 BRGD has shown continued strength in delivering strong pre-sales volumes of ~1msf in the Residential segment, even in these testing times, as well as in its Leasing portfolio. This makes the company one of the favored plays in the Real Estate space. Leasing remains the cornerstone of the business in the near to long term, while Residential is likely to bounce back in 2HFY21E. Accounting for near- term challenges in Residential and Hospitality, we reduce our TP to INR195. volume/value was up 10%/25% YoY to 1.05msf/INR6.5b. Average price realization (INR psf) was up 14% YoY to INR6,176. For FY20, pre-sales volume/value increased 44%/45% YoY to 4.26msf/INR23.8b. Leasing revenue was up 22% YoY to INR1.05b, driven by incremental leasing of 0.21msf in 4QFY20.

Real estate players (like all major sectors) have faced the brunt of Covid-19, which is apparent from the stocks having seen a sharp correction in the past month. Segment wise, mall developers would be the first casualty with closure of malls and invocation of Force Majeure by at least some tenants. Similarly, home buyers' demand as well as construction stoppage will impact the residential segment. On the other hand, office segment cash flows remain protected. We expect the ground level situation to remain operationally challenging for all companies in our coverage universe amid...

With a balance launch pipeline of ~5.1mn sqft in residential segment and ~2.9mn sqft leasing in commercial segment the company remains well on track to achieve the pre-sales guidance of ~4mn sqft in residential and ~3mn in pre-leases for FY20E ex 0.7mn sqft of hard option. The quarter witnessed improvement in collections (+27% QoQ). Mid-income and affordable segments are expected to drive residential sales with ~86% of BEL new launches in the affordable housing segment. Whilst pending pre-tax cash flows of Rs 22.9bn from real estate projects should cover the capex requirement of Rs 9.3bn primarily towards commercial projects, timing mismatch could result in further increase in D/E ratio. We maintain NEUTRAL. Key monitorable: (1) Leasing velocity in Bengaluru SEZ project and (2) Timeline for conclusion of hospitality business divestment. We maintain NEU on BEL with increased SOTP-based TP of Rs 252/sh (vs. Rs 228/sh earlier). BEL maintained strong residential pre-sales momentum and completely leased out Chennai WTC. We await pick in Bengaluru Tech Garden leasing (30% leasing till date).

BEL leased 0.87 million sq ft (msf) area in Q3FY20 (total 2.24 msf area leased in 9MFY20 which is estimated to yield annual rentals of | 212.2 crore). The company reported strong 22.2% YoY revenue growth in leasing business to | 96.0 crore during the quarter. Total leased area stands at 3.3 msf area (4.5 msf total leasable operational area) as of Q3FY20. At WTC Chennai, it leased 1.5 msf out of 2.0 msf leasable area (96.5% area leased including hard option). At Brigade Tech Gardens Phase-I, 0.7 msf out of 1.2 msf leasable area has been leased out as of Q3FY20. BEL has maintained its guidance to...