30 January 2014
3QFY14 Results Update | Sector:
Real Estate
Godrej Properties
BSE SENSEX
20,647
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
6,120
GPL IN
199.2
31.8/ 0.6
298/156
-1 /-36 /-48
CMP: INR160
TP: INR180
Neutral
Financials & Valuation (INR Billion)
Y/E Mar 2014E 2015E 2016E
Net Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA
( )
Div. Yld (%)
21.1
1.4
12.0
1.3
18.7
1.3
9.4
1.3
14.9
1.2
7.8
1.3
10.5
3.0
1.5
7.6
-14.5
8.2
9.2
15.4
13.2
4.0
1.7
8.6
12.9
120.7
7.3
8.5
13.7
16.0
4.8
2.1
10.7
25.1
130.3
8.5
9.5
10.9
BV/Sh (INR) 113.3
Revenue below est; margin beat on higher bookings from Vikhroli commercial:
Godrej Properties’ (GPL) 3QFY14 revenue grew 9.2% YoY (-21% QoQ) to INR2.4b
(below est. of INR3b). However, EBITDA grew 13.7% YoY (+6% QoQ) to INR854m
(above est. of INR772m), implying margin of 35.3% (+9pp QoQ). Better margin is
attributable to higher revenue from Vikhroli (commercial), which enjoys 40-
42% margins. Ex-Vikhroli, blended margin has improved to 29% in 3QFY14
(+10% QoQ). PAT stood at INR374m (+5% QoQ), marginally below estimate of
INR390m due to higher tax rate.
Pre-sales posted moderate QoQ improvement
but broadly remains weak in the
context of a seasonally strong quarter. GPL’s stake of 3QFY14 pre-sales stood at
0.39msf (INR3.3b) v/s 0.43msf (INR2.7b) in 2QFY14 and 0.56msf (INR3.7b) in
3QFY13. 9MFY14 pre-sales stood at INR10.3b (v/s INR19.8b in FY13) v/s annual
estimate of INR13.8b.
Disappointments on negative FCFE continue:
Cash flow weakness continues to
be the biggest concern as GPL posted negative FCFE of INR2.7b (v/s core-FCFE of
negative INR7.3b in 9MFY14). We estimate company’s operating cash flow
(OCF) in 3QFY14 of negative INR1.7b, which was impacted by non-regular
outflows of INR1.5-1.7b - refundable deposit for LBS project, FSI premium,
various approvals, EDC/IDC related to upcoming launches. GPL has also given
exit to Redford India RE Babur PE in Genesis during 3QFY14. Accordingly, net
debt was up by INR2.7b QoQ to INR15.3b (0.68x).
Maintain Neutral:
Our key concern has been company’s failure to improve
operating cash flow, which is likely to see further deterioration with almost
INR11b of cash outgo towards BKC project over FY14-16. We expect capital
efficiency and cash flow to remain subdued over FY15, before a recovery in
FY16, on the benefits of planned launches percolating. GPL trades at 14.9x
FY16E EPS and 1.2x FY16E BV (RoE of 9%). Maintain
Neutral.
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.

Godrej Properties
Revenue below est; margin beat on higher bookings from Vikhroli
commercial
2QFY14 revenue grew 9.2% YoY (-21% QoQ) to INR2.4b, below est of INR3b.
However, EBITDA grew 13.7% YoY (+6% QoQ) to INR854m, and stood ahead of
est of INR772m, implying margin of 35.3% (+9pp QoQ).
Higher margin is attributable to high revenue contribution from Vikhroli
(commercial) project – which enjoys 40-42% margins.
Ex-Vikhroli, too, blended margin has improved to 29% in 3QFY14 (+10% QoQ)
due to (1) better margins of 30-35% in newer projects viz. Horizon (Pune), new
phases of Prakriti etc, and (2) no major contribution from loss making
commercial projects at Kolkata.
PAT stood at INR374m (+5% QoQ) stood marginally below est of INR390m due
to higher tax rate. Other income was higher due to higher cash balance post
rights issue.
Revenue contribution mix (%): Godrej One (Vikhroli) key contributor
100%
75%
50%
25%
0%
Garden City (Ahmedabad)
Waterside (Kolkata)
Prakriti (Kolkata)
Frontier (Gurgaon)
Genesis (Kolkata)
Eternia (Chandigarh)
Godrej One
Horizon (Pune)
Others
Waterside (Kolkata)
Platinum (Bangalore)
Source: Company, MOSL
Project-wise execution (% completion)
1QFY14
96
79
42
86
58
63
53
2QFY14
88
3QFY14
82
75
63
97
87
76
86
51 58
39 38
29
90 76
52 83 59 51 28 46 46 32 36 84 79 71 57 97 85 73 81
87 75 32 49 79 53 48 24 43 34 20 32 82 76 67 53 96 82 72 76
37
Source: Company, MOSL
Presales posted moderate QoQ improvement
30 January 2014
New phases of Horizon (Pune) and E-City (Bangalore) were key launches in
3QFY14.
Overall presales posted moderate QoQ improvement, albeit, broadly remains
weak in the context of a seasonally stronger quarter.
Adjusting for JV partners stake and DM fees projects, we calculate GPL’s
2

Godrej Properties
2QFY14 presales at 0.39msf (INR3.3b) v/s 0.43msf (INR2.7b) in 2QFY14 v/s
0.56msf (INR3.7b) in 3QFY13.
Key presales contributors (in terms of value) are Godrej One, Vikhroli
commercial (18%), BKC commercial (24%), Summit, Gurgaon (13%) and
Ahmadabad (10%).
Overall presales velocity weakened in Ahmadabad and Kolkata, stable/better in
Mumbai commercial, while improved in Bangalore projects.
In BKC, GPL has sold 0.23msf (INR5.9b) till date v/s guidance ~0.25msf by
March-14.
9MFY14 presales stood at INR10.3b (v/s INR19.8b in FY13) as against our
annual est of INR13.8b.
Disappointments on negative FCFE continues, much hinges on fresh
launches
Cash flow weakness continues to be the biggest concern, as GPL posted
negative FCFE of INR2.7b (v/s core-FCFE of negative INR7.3b in 9MFY14).
We calculate GPL’s operating cash flow (OCF) in 3QFY14 of negative INR1.7b,
which was impacted by non-regular outflows of INR1.5-1.7b, viz. (1) INR0.2b
(refundable deposit for LBS project), (2) INR 0.4-0.5b of FSI premium, (3)
INR0.3b of quarterly outgo to Godrej & Boyce for Vikhroli land, and (4) balance
on various approval related costs pertaining to upcoming redevelopment
projects (Sahakar Nagar, and Ghatkopar) and EDC/IDC payment in Gurgaon
projects.
This was further impacted by outflow of INR0.4-0.5b to Redford India RE Babur
exit in Genesis (Kolkata) project concluded in 3QFY14.
Consequently, net debt was up by INR2.7b QoQ to IRN15.2b (0.68x). Cost of
debt stood at 11.43% (v/s 11.36% QoQ).
Pre-sales up OoQ (GPL’s stake), but largely weak for a
seasonally stronger quarter
Sales volume (msf)
7.7
4.6
3.3
0.6
2.3
2.2
3.5
5.0
7.2
Margins up QoQ, with higher Vikhroli contribution (%)
Sales value (INR b)
6.5
5.9
6.0
4.2
3.2
Source: Company, MOSL
Source: Company, MOSL
30 January 2014
3

Godrej Properties
OCF/FCFE consistently negative in FY14 (INR b)…
… resulting into IRN2.7b QoQ rise in net debt
Net debt (INR b)
2.0
0.9 1.0
8
9
1.2
1.1 1.2 1.1 1.0 1.1 1.1
Net DER(X)
Cash flow from Operations
FCFE
0.5
5
0.7
6
0.6 0.7
12 19 15 17 16 15 15 16 13 15
Source: Company, MOSL
Source: Company, MOSL
Other updates
After aggressive recent history of new project acquisitions, GPL’s launch pipeline
remains strong with many high margin projects viz. Mumbai (Sahakar Nagar,
Ghatkopar, Bhandup and Panvel), and NCR (Sector 88/89A and Okhla, Delhi)
slated for launch over next 12-18 months.
However there have been majors delays in monetization due to approval
process, regulatory changes and weakness in demand sentiment.
Godrej Central (Sahakar Nagar 1) and Panvel would be the key project to get
launched in 4QFY14, where management is optimistic due to strong enquiries.
Valuation and views
Our key concern has been its failure to improve operating cash flow, which
would going to see further deterioration with almost INR11b of cash outgo
towards BKC project over FY14-16.
We expect the capital efficiency and cash flow to remain subdued over FY15,
and recovery in core operations to be deferred till FY16 – when the benefits of
planned launches, probably, start percolating in. Faster sales in BKC commercial
would be a key as well.
Key near-term triggers are: a) success in stated launch plan, and b) fast
monetization in BKC and other commercial.
GPL trades at 14.9x FY16E EPS and 1.2x FY16E BV (RoE of 9%). Maintain
Neutral.
30 January 2014
4

Godrej Properties
Godrej Properties: an investment profile
Company description
Godrej Properties Limited (GPL), established in 1991, is
part of the 113-year-old Godrej group of companies.
GPL, which develops residential and commercial
properties,
recently
entered
large
township
development. The company expanded its footprint into
12 key tier-1 and tier-2 cities, with a land bank of ~400
acres and developable area of ~77msf, where it has
economic interest for over 50msf.
Recent development
Given exit to Redford India RE Babur in Genesis
(Kolkata).
Valuation and views
Key investment positives
Focused mid-income housing play with an asset-
light model. GPL's development portfolio is skewed
in favor of JDA projects.
Widely recognized Godrej brand gives GPL the
unique strength to emerge as a true pan-India
player.
We expect the capital efficiency and cash flow to
remain subdued over FY15, and recovery in core
operations to be deferred till FY16 – when the
benefits of planned launches, probably, start
percolating in. Faster sales in BKC commercial would
be a key as well.
Key near-term triggers are: a) success in stated
launch plan, and b) fast monetization in BKC and
other commercial.
GPL trades at 14.9x FY16E EPS and 1.2x FY16E BV
(RoE of 9%). Maintain
Neutral.
Key challenges
Higher inclination towards joint-development
model caps gains during an economic upswing and
exposes the company to the potential risk of
operational conflicts with JD partners.
High leverage and negative OCF could exert
pressure on balance sheet
Comparative valuations
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
GPL
21.1
18.7
1.4
1.3
3.4
2.8
12.0
9.4
Prestige
16.3
12.7
1.8
1.6
3.2
1.8
11.3
8.6
Oberoi
17.7
12.7
1.7
1.5
6.4
5.0
11.4
8.1
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
7.6
8.6
Consensus
Forecast
8.4
12.4
Variation
(%)
-9.4
-31.2
Target price and recommendation
Current
Price (INR)
160
Target
Price (INR)
180
Upside
(%)
12.5
Reco.
Neutral
Shareholding pattern (%)
Dec-13
Promoter
Domestic Inst
Foreign
Others
75.0
1.2
14.5
9.4
Sep-13
75.0
1.4
15.5
8.1
Dec-12
75.0
2.3
13.4
9.4
Stock performance (1-year)
30 January 2014
5

Godrej Properties
Financials and valuation
30 January 2014
6

Godrej Properties
NOTES
30 January 2014
7

Disclosures
Godrej Properties
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Godrej Properties
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8