HDFC Securities is bullish on Kolte Patil Developers has recommended buy rating on the stock with a target price of Rs 311 in its research report dated May 30, 2019.
HDFC Securities' research report on Kolte Patil Developers
4QFY19 Revenue was weak at Rs 2.0bn (-59% YoY, +170% QoQ), lower by Rs 1.8bn due to IND AS 115. After an EBITDA loss in 3QFY19, KPDL posted 4QFY19 EBITDA of Rs 767mn (vs. Rs 1.0bn YoY). 4QFY19 APAT came in at Rs 401mn (Rs 176mn lower due to IND AS 115). After strong 2Q/3QFY19 with 0.8mn sqft each (led by strong traction in Tuscan and Western Avenue; now marginal inventory), KPDL recorded a 21.3% QoQ dip to 0.6mn sqft in 4QFY19 (~0.5mn sqft YoY). Bolstered by Life Republic (~1mn sqft) and Ivy Estate, KPDL posted encouraging pre-sales of 2.7mn sqft (+28.1% YoY) in FY19. Debt has bloated up: Collections declined 18% YoY to Rs 3.1bn in 4QFY19. FY19 collections witnessed only a marginal 6% growth to Rs 11.8bn. Led by Downtown (IL&FS’ stake) and Life Republic (ICICI Ventures’ stake) buyouts (~Rs 1bn infused) and ~Rs 0.7-0.8bn higher construction spend led by Jai-Vijay and Raga (Bengaluru), gross debt (incl. structured debt) inched up Rs 1.2bn YoY to Rs 8.1bn (Net debt is Rs 5.2bn vs Rs 2.9bn YoY). We do not foresee any major reduction in the near term. Life Republic update: KPDL has entered into a SPA to buy out ~50% stake of ICICI ventures for Rs 2.1bn (~Rs 0.7bn already paid). Additionally 12 acres of land (equivalent FSI of ~1mn sqft) will be allocated post spending ~Rs 0.3bn on premium for expansion of FSI allocation to 1.0 from existing 0.5. Mumbai projects: OC for Jai-Vijay is expected to come in 60days. In the remaining 3 projects, KPDL expects all of them to be under development by Mar-20E (~0.6mn sqft KPDL’s share – Rs 10/2.5bn revenue/cash flow potential).
Outlook
We maintain BUY with SOTP based TP of Rs 311/sh. We have cut our FY20/21E EPS by 25.4/14.0% to factor in a delay in projects moving into revenue recognition under IND AS 115.
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