31 July 2012
1QFY13 Results Update | Sector: Real Estate
Prestige Estates
BSE SENSEX
S&P CNX
17,144
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
5,200
PEPL IN
328.1
137/58
-4/41/-10
36.4
0.7
CMP: INR110
TP: INR140
Buy
Sequentially stable revenue bookings:
Prestige Estates' (PEPL) revenue for 1QFY13 declined 12% YoY (grew
8% QoQ). EBITDA grew 2% YoY (3% QoQ) to INR704m; EBITDA margin was 32% v/s 28% in 1QFY12 and 34% in
4QFY12. Net profit grew 35% YoY (29% QoQ), led by higher other income and lower effective tax rate (25.2%
v/s 33.8% in 4QFY12). Debtors are down 6% QoQ to INR6.6b. Key projects with high outstanding debtors are:
(1) Shantiniketan (INR2.7b), (2) Oasis (INR1b), and (3) Golfshire (INR1.2b).
Impressive sales performance, collections mixed:
Sales momentum has been impressive at 2msf (INR10.1b)
v/s 1.3msf (INR6.5b) in 4QFY12 and 0.5msf (INR2.1b) in 1QFY12. With this, PEPL is well on track to achieve the
guidance of INR25b for FY13. The company launched 2.2msf across six projects in 1QFY13, most of which
witnessed strong sales, with 35-95% of the stock already sold in 1QFY13.Collection run-rate stood at INR4.2b,
down 7% QoQ, albeit in line with the guidance of INR16b for FY13.
Leasing momentum stable:
New leasing stood at 0.46msf (PEPL's share at 0.6msf) in 1QFY13, taking cumulative
leasing to 8.44msf (PEPL's share at 5.1msf). Rental income was INR489m (up 3% QoQ and 27% YoY).
Leverage up:
Net debt is up by INR1.8b QoQ, largely led by fresh construction loan and considerations toward
increase in stake in Cessna Business Park. Net debt stood at INR17.7b (effective stake of INR15.1b). Net debt-
equity stood at 0.7x v/s 0.68x in 4QFY12.
Valuation and view
Strong sales performance in 1QFY13 renders robust cash flow visibility and minimizes the downside risk to
our estimates (sales of INR24b and collections of INR16b in FY13). We expect PEPL to continue its strong
operating performance, driven by healthy launch pipeline over FY13.
Weaker revenue booking thus far and slower collections/execution in key projects (KF Tower, Golf Course)
are concerning. We expect the overhangs to be mitigated partially over the coming quarters.
Key triggers for the stock would be:
(1) improvement in customer collections and debtors, (2) on-time
monetization and execution of flagship projects such as Golfshire, Kingfisher Tower, etc, and (3) acquisition
of new turnkey projects. Stock trades at 19.2x FY13E EPS, 1.6x FY13E BV, and at 38% discount to NAV estimate.
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.

Prestige Estates Projects
Sequentially stable revenue and margins, higher other income, and lower
tax boost PAT
Revenue declined 12% YoY (grew 8% QoQ). EBITDA grew 2% YoY (3% QoQ) to
INR704m; EBITDA margin was 32% v/s 28% in 1QFY12 and 34% in 4QFY12.
Net profit grew 35% YoY (29% QoQ), led by higher other income and lower effective
tax rate (25.2% v/s 33.8% in 4QFY12). The reduction in effective tax rate is
attributable to higher proportion dividend income and income from partners'
profit which are taxed at lower rates.
Key developments: (1) INR489m of rental income (up 3% QoQ and 27% YoY), and
(2) commencement of revenue from White Meadows Villas (INR377m) and
Prestige Tech Park III (INR762m).
Net debt is up by INR1.8b QoQ, largely led by fresh construction loan. Net debt
stood at INR17.7b (effective stake of INR15.1b). Net debt-equity stood at 0.7x v/s
0.68x in 4QFY12.Cost of debt up 13.7% (v/s 13.6% in 4QFY12)
Revenue booking lagging sales run rate; debtors down 6% QoQ; 2HFY13
seems to see near doubling revenue booking run-rate
Despite strong sales run rate (average of INR5b/quarter since FY11), the POCM
(percentage of completion method) revenue booking run rate has been muted
(average of INR2.2b/quarter) due to conservative recognition policy and delays in
key projects. However, with meaningful progress in execution, we expect
meaningful ramp-up in booking run rate over 2HFY13.
While unrecognized revenue booking (pre-sales concluded) was INR41.5b v/s
INR32.8b in 4QFY12, the management expects partial revenue booking to
commence across 8 projects (including White Meadows, Kingfisher Tower,
Tranquility, Bella Vista, Sunny Side, Park View, etc) in FY13, where current pre-
sales stood at ~INR30b. The management maintained its revenue booking
guidance of INR15b for FY13.
Debtors declined 6% QoQ to INR6.6b. Key projects with high outstanding debtors
are: (1) Shantiniketan (INR2.7b), (2) Oasis (INR1b), and (3) Golfshire (INR1.2b).
Collections in completed projects have been behind our expectations. The
management has guided for ~INR3b reduction in debtors in completed projects
by Dec-12.
Revenue booking run rate has
lagged till date (INR m)
Rental run-rate largely stable
QoQ (INR m)
Net debt up INR1.8b QoQ on fresh
construction finance
Source: Company, MOSL
31 July 2012
2

Prestige Estates Projects
Operating performance impressive; sales healthy; collections a mixed bag
PEPL launched 2.2msf across six projects in 1QFY13, most of which witnessed
strong sales, with 35-95% of the stock already sold in 1QFY13.
Total sales were 2msf (INR10.1b) v/s 1.3msf (INR6.5b) in 4QFY12 and 0.5msf
(INR2.1b) in 1QFY12.
While ~60% of the sales volume was driven by new launches (2.2msf), among the
older projects, Bella Vista, Tranquility, White Meadows and Tech Park III
(commercial) maintained strong run rate.
After a few subdued quarters, the sales from premium segment has witnessed
meaningful improvement (26% contribution v/s 19% in 4QFY12), led by stronger
off-take in White Meadows, May Berry and Oasis. Commercial segment also
witnessed higher absorption driven by investors sales at Prestige tech Park III.
Despite concern over weak commercial demand outlook, the management has
hinted for meaningful visibility of absorption in most of its ongoing projects.
Post the robust growth in 1QFY13, PEPL is well on track to achieve the guidance of
INR25b for FY13. We are maintaining our sales assumption of INR24b for FY13.
Collection run rate stood at INR4.2b, down 7% QoQ, albeit in line with the guidance
of INR16b for FY13. Project level collections suggest mixed bag performance:
Improvement in FY12 launches, viz. Tranquility, Sunnyside, Bella Vista and Park
View
Stagnant for older projects - White Meadows, Kingfisher Tower and Golfshire
Muted for new launches (5-12%), viz. Silver Crest, Silver Sun, May Berry,
Summerfield, Garden Bay and Glen Wood
New leasing stood at 0.46msf (PEPL's share at 0.6msf) in 1QFY13, taking cumulative
leasing to 8.44msf (PEPL's share at 5.1msf). We estimate PEPL's rental income at
INR1.97b for FY13 v/s INR1.65b in FY12.
Sales momentum strong, led by
new launches (msf)
Achieved best ever quarterly
sales (INR b) in 1QFY13
Sequentially lower contribution from
mid-income projects (%)
Source: Company, MOSL
31 July 2012
3

Prestige Estates Projects
Realizations declining, with greater focus on
mid-income segment ('000)
Project-wise contribution to sales value (%)
Source: Company, MOSL
Customer collections down QoQ (INR m)
Collections, a mixed bag - improving for FY12 launches; subdued
for new projects (% of sales)
Valuation and view
Amidst a challenging macroeconomic environment, the Bengaluru property market
has been resilient compared with other markets due to (a) rational pricing
movement, and (b) lower commercial vacancy. Given its presence across verticals
and strong client base, PEPL would be a key beneficiary.
Strong sales performance in 1QFY13 renders robust cash flow visibility and
minimizes the downside risk to our estimates (sales of INR24b and collections of
INR16b in FY13). We expect PEPL to continue its strong operating performance,
driven by healthy launch pipeline over FY13.
Weaker revenue booking thus far and slower collections/execution in key projects
(KF Tower, Golf Course) are concerning. We expect the overhangs to be mitigated
partially over the coming quarters.
Key triggers for the stock would be: (1) improvement in customer collections and
debtors, (2) on-time monetization and execution of flagship projects such as
Golfshire, Kingfisher Tower, etc, and (3) acquisition of new turnkey projects. The
stock trades at 19.2x FY13E EPS, 1.6x FY13E BV, and at 38% discount to NAV estimate.
31 July 2012
4

Prestige Estates Projects
Prestige Estates: an investment profile
Company description
Prestige Estates Projects Ltd (PEPL), a premium
developer in the South India real estate market, has
strong brand equity in the region, notably in Bengaluru.
It has been operating in the RE industry over the past 25
years, during which it delivered ~160 projects of ~45msf
of developable area across various RE segments. The
company has developed some of Bengaluru's largest
integrated developments and identifiable landmarks
like Prestige Shantiniketan, UB City, and one of
Bengaluru's most successful malls, Forum.
Key investment risks
High dependence on the IT-driven Bangalore market
with 75% of Prestige's land bank is in Bangalore city,
contributing 80% of its GAV.
Slower customer collection and high debtor level
High exposure to annuity assets keeps Prestige asset
heavy and limits its capacity to reduce debt
Recent developments
Key investment arguments
PEPL's presence across asset classes, superior
execution and the steady growth potential of
southern cities make it an attractive play.
Promising southern markets and quality assets
render meaningful cash flow visibility
Mitigation of concerns viz. a) improvement in
customer collection and debtors level, b) on-time
monetization and execution of flagship projects such
as Golf shire, Kingfisher Tower etc, and (c) acquisition
of new turnkey projects would be key trigger for the
stock
1QFY13 sales momentum has been impressive at
2msf (INR10.1b) v/s 1.3msf (INR6.5b) in 4QFY12 and
0.5msf (INR2.1b) in 1QFY12. With this, PEPL is well
on track to achieve the guidance of INR25b for FY13.
Valuation and view
The stock trades at 19.2x FY13E EPS, 1.6x FY13E BV,
and at 38% discount to NAV estimate.
Comparative valuations
Prestige
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
19.2
12.9
1.6
1.4
3.5
2.7
10.8
8.1
Godrej Prop
32.6
25.5
2.6
2.4
6.3
5.0
28.6
21.3
Phoenix
22.1
12.9
1.5
1.4
8.8
5.4
15.2
10.2
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
5.7
8.5
Consensus
Forecast
7.2
10.3
Variation
(%)
-21.3
-17.8
FY13
FY14
Target price and recommendation
Current
Price (INR)
110
Target
Price (INR)
140
Upside
(%)
27.3
Reco.
Buy
Stock performance (1 Year)
Shareholding pattern (%)
Jun-12
Promoter
Domestic Inst
Foreign
Others
80.0
6.6
11.7
1.8
Mar-12
80.0
5.6
12.7
1.6
Jun-11
80.0
1.1
17.9
1.1
31 July 2012
5

Prestige Estates Projects
Financials and Valuations
31 July 2012
6

Prestige Estates Projects
N O T E S
31 July 2012
7

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Prestige Estates Projects
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