31 May 2013
4QFY13 Results Update |
Sector: Real Estate
Unitech
BSE Sensex
S&P CNX
20,215
6,124
Bloomberg
UT IN
Equity Shares (m)
2,438.8
M.Cap. (INR b)/(USD b)
58.4/1.0
52-Week Range (INR)
41/18
1,6,12 Rel. Perf. (%)
-15/-29/-9
CMP: INR24
TP: INR40
Buy
Financials & Valuation (INR b)
Y/E March
Net Sales
EBITDA
Adj PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
29.9
0.7
36.4
0.0
18.3
0.7
23.9
0.6
15.1
0.5
19.4
0.6
2013 2014E 2015E
24.4
3.3
2.1
0.8
-11.7
35.2
1.8
2.7
0.0
29.3
5.0
3.4
1.3
63.5
36.1
2.9
3.1
11.6
31.6
6.1
4.1
1.6
20.7
45.7
3.5
3.7
9.6
4QFY13 revenue grew 26% YoY (32% QoQ) to INR8.5b v/s our estimate of
INR6.8b. FY13 revenue was flat at INR24.4b. Higher revenue booking is
attributable to gradual pick-up in execution and revenue commencement
from phase II of Uniworld Resort's villas (accounted for ~INR1b of additional
revenue on total presales of INR3.5b-4b).
EBITDA was INR797m v/s our estimate of INR1.2b. EBITDA margin was 9.4%
v/s 17.2% in 3QFY13. The sharp margin deterioration was due to write-off of
INR500m of bad debtors (included in other expense). Adjusting for this,
EBITDA margin would have been 15.5%.
PAT was INR303m v/s our estimate of INR785m, impacted by INR1.04b
provisioning pertaining to Telecom business post cancellation of license.
The company has another INR8b of provisioning due to this, which would be
accounted over 1HFY14 (based on certain settlement milestone).
Margins in the core real estate business have posted strong improvement,
partly due to higher revenue booking. EBIT margin was 25.5% v/s 18.1% in
3QFY13. This was also due to revenue commencement from Gurgaon project,
profitability of which is higher.
With higher focus on execution, the company launched only 4msf in FY13
v/s 7.8msf in FY12. Lower launches led to weaker presales of INR28b v/s our
estimate of INR29b and INR38b in FY12. Presales run rate declined QoQ in
4QFY13; the management cited lowering of broker commission in Noida
market as one of the possible reasons.
Net worth declined by INR8b due to restatement of a subsidiary's financials.
We await further details.
The stock trades at 0.5x FY15E BV, 15.1x FY15E EPS and 48% discount to our
NAV of INR50. Maintain
Buy,
with a TP of INR40 (20% discount to NAV).
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.

Unitech
4QFY13 revenue beats estimates with threshold crossing from Gurgaon
projects
4QFY13 revenue grew +26%YoY (+32%QoQ) to INR8.5b (v/s est. of INR6.8b). FY13
revenue stood flat YoY at INR24.4b.
Higher revenue booking is attributable to gradual pick-up in execution and revenue
commencement from phase II of Uniworld Resort's villas (accounted ~INR1b of
additional revenue on total presales of INR3.5-4b).
Margins up in core business, albeit overall EBITDA margin down write-off of
bad debtors
EBITDA stood at INR797m (v/s est. of INR1.2b), translating into margin of 9.4%
(v/s 17.2% in 3Q). Sharp deterioration in margin is due to write-off of INR500m of
bad debtors (included in other expense). Adjusting for the same, EBITDA margin
would have 15.5%.
Margins in core real estate business however have posted strong improvement,
partly due to higher revenue booking benefiting operating leverage. EBIT margin
in 4Q stood at 25.5% v/s 18.1% in 3Q. This is also due to revenue commencement
from Gurgaon project with higher profitability.
PAT dent due to provisioning from telecom business, albeit higher other
income offset loss partially
PAT stood at INR303m v/s est. of INR785m, impacted by INR1.04b provisioning
pertaining to telecom business post cancellation of license.
The company has another INR8b of provisioning due to from this process which
would be accounted over 1HFY14 (based on certain settlement milestone).
Other income was higher due to INR250m of dividend receipt, while declining
corporate debt has led to sharp decline in interest cost in P&L. It accounts for
project level interest in cost of construction (above EBITDA).
FY13/4QFY13 presales declined amidst lower new launches
With higher focus on execution, the company has launched only 4msf in FY13 v/s
7.8msf in FY12. Noida accounted for 55% of launch, while Gurgaon only 10%.
Lower launch has led to weaker presales of INR28b (v/s est. of INR29b) in FY13 as
against INR38b in FY13.
Presales run-rate declined QoQ in 4QFY13 - with lowering brokers' commission in
Noida market cited as one of the possible reasons by the management.
It is also changing its strategy to do preliminary construction activities in sites
before official launching the projects - which would be followed in upcoming
Gurgaon launches. The management has also guided for phased monetization of
projects going ahead (unlike front heavy selling currently) to mitigate the possible
cost escalation through achieving higher realizations at later stage of the project.
Other key updates
Net worth down by INR8b due re-statement of financial of one of the subsidiaries
- further details awaited.
Collection run-rate has decline in 4QFY13 due to weaker sales to ~INR6b (v/s INR7b
in 3Q).
31 May 2013
2

Unitech
Construction spending run-rate stood at INR3.2b as against targeted level of
INR3.75b by FY14.
Net debt stood at INR56.4b. (0.52x)
Revenue run-rate catching up pace
with presales
Core Real Estate margin improved
Net debt largely stable, albeit up QoQ
due to lower collections
Steady decline in recent
launches (msf) led…
…decline in pre-sales (msf)
Trend in quarterly sales and
realizations
Construction workforce aimed
at 30K by Dec-13 ('00)
FY13 delivery stands at 3.2msf
Change in debtors as % of revenue
shows improving collections
Source: Company, MOSL
31 May 2013
3

Unitech
Execution improving; remain cautious over B/S quality; maintain Buy
Uptick in revenue booking in 4QFY13 is a sign of improvement in construction
activity. This should lead to a steady reduction in execution backlog, with
improvement in cash conversion cycle on the back of robust presales of ~INR156b
(a significant portion yet to be collected).
~25% uptick in construction spending (to INR16b-17b v/s INR12b-13b in FY12-
1HFY13) should augment customer collections by INR9b-10b. A steady fix-up in
execution and subsequent business recovery would be a key to bring back business
stability.
However, we remain cautious over the quality of loans and advances, subdued
incremental presales, and potential write-offs similar to 4QFY13, impacting
margins or net worth. The stock trades at 0.5x FY15E BV, 15.1x FY15E EPS and 48%
discount to our NAV of INR50. Maintain
Buy,
with a target price of INR40 (20%
discount to NAV).
31 May 2013
4

Unitech
Unitech: an investment profile
Company description
Unitech is the second largest listed real estate developer
in India by market capitalization. It was incorporated in
February 1971 and converted to a public limited company
in October 1985. In 1986, it launched its real estate
development business with its first project in Gurgaon.
Unitech Group also has a construction business, which
undertakes civil construction and infrastructure projects.
Valuation and view
Uptick in revenue booking in 4QFY13 is a sign of
improvement in construction activity. This should
lead to a steady reduction in execution backlog, with
improvement in cash conversion cycle on the back
of robust presales of ~INR156b (a significant portion
yet to be collected).
However, we remain cautious over the quality of
loans and advances, subdued incremental presales,
and potential write-offs similar to 4QFY13, impacting
margins or net worth. The stock trades at 0.5x FY15E
BV, 15.1x FY15E EPS and 48% discount to our NAV of
INR50. Maintain
Buy,
with a target price of INR40 (20%
discount to NAV).
Key investment arguments
Improved revenue mix, accelerated execution and
focus on affordable housing segment.
Cash flow visibility from robust pre-sales.
Cheap valuation, trading at lower end of medium-
term multiple band.
Sector view
Key investment risks
Negative news flow on the telecom 2G issue.
High debtors and execution backlog.
Recent developments
Lower launch has led to weaker presales of INR28b
(v/s est. of INR29b) in FY13 as against INR38b in FY13.
Net worth down by INR8b due re-statement of
financial of one of the subsidiaries - further details
awaited.
RE sector has been a major underperformer over the
last 12 months with multiple operational and non
operational headwinds such as volume slowdown
(due to declining affordability), monetary tightening,
pilling liquidity pressure etc. However, with
imminent rate cut cycle and increasing instances of
regulatory pressure subsiding, we believe the
outlook will improve going forward.
Comparative valuations
Unitech
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
18.3
15.1
0.7
0.5
4.1
3.8
23.9
19.4
DLF
42.1
20.1
1.3
1.3
5.8
5.2
15.2
12.0
Anant Raj
8.7
6.9
0.5
0.5
4.7
3.4
9.4
7.3
EPS: MOSL forecast v/s consensus (INR)
Most
Forecast
1.3
1.6
Consensus
Forecast
1.6
2.2
Variation
(%)
-17.8
-26.0
FY14
FY15
Target price and recommendation
Current
Price (INR)
24
Target
Price (INR)
40
Upside
(%)
66.7
Reco.
Buy
Stock performance (1 year)
Shareholding pattern (%)
Dec-12
Promoter
Domestic Inst
Foreign
Others
31 May 2013
48.4
1.2
33.8
16.6
Sep-12
48.4
1.4
33.3
16.9
Dec-11
48.4
1.9
33.4
16.4
5

Unitech
Financials and Valuation
31 May 2013
6

Unitech
N O T E S
31 May 2013
7

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Unitech
No
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No
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