Sunteck Property Rating ‘Buy’; Strong figures in the last quarter

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Sunteck Realty (SRL) achieved ~Rs 5 billion presale (+36% YoY/43% QoQ) in Q4FY22. FY22 sales of ~Rs 13 billion are up 27% year on year. Collections during Q4FY22 grew 26% YoY/50% QoQ to ~Rs 4 billion, while collections in FY22 grew from ~Rs 10.5 billion by 35% YoY, both the best ever for SRL.

We expect a higher sales trajectory for the company continuing with the housing cycle that is likely to change, continued project portfolio expansion (~23msf addition in the last 18 months), launch of new projects/phases and release of inventory in existing projects. Maintain ‘Buy’ with a TP of Rs 590/share.

Robust performance: New sales value shot up 36% YoY / 43% QoQ to around Rs 5 billion during Q4FY22. FY22 sales of ~ Rs 13 billion were up 27% year over year (vs. FY21 bookings of ~ Rs 10.2 billion).

Collections remain strong: SRL reported collections of ~Rs 4 billion during the quarter, up 26% yoy/50% qoq. FY22 collections of ~Rs 10.5 billion are up 35% year on year (FY21 collections were ~Rs 7.8 billion). Collection efficiency in FY22 was 81% (76% in FY21). Both on a quarterly and annual basis, this is the best collection ever in the company’s history.

New launches, cash flows and debt remain key variables: Since the start of the pandemic, the company has added five projects (Vasai, Vasind, Borivali, Kalyan and Pen-Khopoli) totaling ~23msf, using the asset-light model. We believe project launches are key to driving sales momentum. We expect the launch of projects such as Vasai, Naigaon Phase 3, Borivali and Kalyan to boost the sales trajectory. We also believe that SRL’s focus on cash flow management should keep its balance sheet healthy.

Outlook and Valuation: New Launch Key; Retain ‘BUY’ – As we highlighted in our comprehensive industry report, RERA-driven consolidation offers growth opportunities for organized players like SRL. We appreciate SRL’s diversified presence in the Mumbai Metropolitan Region (MMR) and robust execution capabilities. A revival in housing demand and SRL’s focus on cash flows should serve her well. The company’s low gearing provides scope to leverage its balance sheet and take advantage of attractive land purchase opportunities to grow its NAV. New project launches are an important inventory catalyst in our view. Maintain ‘BUY/SN’ with a target price of Rs 590/share (equivalent to the NAV of Rs 590.





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