29 July 2013
1QFY14 Results Update | Sector:
Real Estate
Godrej Properties
BSE SENSEX
19,748
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Financials & Valuation
Y/E MAR
Net Sales
EBITDA
NP
EPS
EPS Gr. (%)
BV/Sh.
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2013
2,858
1,384
17.7
41.3
183.1
9.6
8.6
29.0
2.8
2014E
3,069
1,667
21.4
20.4
199.8
11.2
10.3
24.1
2.6
S&P CNX
5,886
GPL
78.0
40.9/0.8
689/482
-8/-15 /-16
(INR m)
2015E
4,490
2,556
32.8
53.3
227.9
15.3
13.2
15.7
2.3
CMP: INR 515
TP: INR560
Buy
One-off other income drives PAT:
Revenue declined 11% YoY and 35% QoQ to
INR2b, EBITDA grew 0.6% YoY but declined 59% QoQ to INR406b, and PAT grew
130% YoY but declined 26% QoQ to INR395m. PAT growth was driven by surge in
other income, which includes one-off inflow of INR400m due to 49% stake sale in
Sahakar Nagar II
to APG-led co-investment platform. Key revenue contributors: (1)
Godrej One
(30%), (2)
Prakriti,
Kolkata (14%), (3)
GGC,
Ahmedabad (29%), and (4)
Frontier,
Gurgaon (12%). In 1QFY14,
GGC
Phase III C (B) and
Horizon
(Pune) crossed
revenue recognition threshold.
Operating margins contracted sequentially:
EBITDA margin expanded 2.3% YoY but
shrank declined 11.5% QoQ to 20.1%. Assuming EBITDA margin of commercial
project,
Godrej One
(Vikhroli, Mumbai) at ~40%, core EBITDA margin at other
projects contracted 12% QoQ to ~12%. Higher proportion of revenues from low
margin
Garden City,
Ahmedabad (GGC) project and cost escalations across joint-
development projects impacted margins.
BKC commercial posted encouraging response:
New phases of
GCC
(Ahmedabad),
Prakriti
(Kolkata) and
Summit
(Gurgaon) were the key launches in 1QFY14. Adjusting
for JV partners’ stake and DM fees, we calculate GPL’s 1QFY14 presales at 0.49msf
(INR4.2b), flat YoY. Total presales grew 19% YoY to INR6b. The key positive in
1QFY14 was strong sales in BKC commercial, where it sold ~0.14msf (v/s 0.05msf in
4QFY13) at average realization of INR24k/sf. Against the management’s target of
0.25msf annually; cumulative sales at BKC were 0.19msf.
FCFE negative; net debt up:
Operating cash flow (OCF) merely broke even, while
FCFE has been negative in 1QFY14, driven by cash outgo towards (a) deposits on
recently acquired Okhla (Delhi) project, and (b) facilitating HDFC PE Fund’s exit from
Chennai and Chandigarh projects. We estimate negative FCFE of INR1.1b in 1QFY14,
leading to increase in net debt to INR16.1b (1.1x). Cost of debt stood at 11.4% as
against 11.7% in 4QFY13.
10,371 11,404 15,575
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.