Sunteck Realty (SRL) clocked ~Rs 5 bn in pre-sales in Q4FY22 (up 36% YoY/43% QoQ). FY22 sales at ~Rs 13 bn are up 27% YoY. Collections during Q4FY22 increased 26% YoY/50% QoQ to ~Rs 4 bn while FY22 collections at ~Rs 10.5 bn rose 35% YoY—both best-ever for SRL.
We expect a higher sales trajectory for the company going ahead with the housing cycle likely turning, sustained expansion in project portfolio (~23msf addition over 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 about Rs 5 bn during Q4FY22. FY22 sales at ~Rs 13 bn increased 27% YoY (versus FY21 bookings of ~Rs 10.2 bn).
Collections stay strong: SRL reported collections of ~Rs 4 bn during the quarter, up 26% YoY/50% QoQ. FY22 collections at ~Rs 10.5 bn are up 35% YoY (FY21 collections were ~Rs 7.8 bn). Collection efficiency in FY22 stood at 81% (76% in FY21). On both quarterly and annual basis, this is the best-ever collection in the company’s history.
New launches, cash flows and debt remain key variables: Since the onset of the pandemic, the company has added five projects (Vasai, Vasind, Borivali, Kalyan and Pen-Khopoli) totalling ~23msf, leveraging the asset-light model. Launch of projects is critical to boosting the sales momentum going ahead, in our view. We expect that launch of projects such as Vasai, Naigaon Phase 3, Borivali and Kalyan will boost the sales trajectory. We also believe SRL’s focus on cash flow management should keep its balance sheet healthy going ahead.
Outlook and valuation: New launches key; maintain ‘BUY’ – As we highlighted in our comprehensive sector report, RERA-driven consolidation is throwing up growth opportunities for organised players such as SRL. We like SRL’s diversified presence in the Mumbai Metropolitan Region (MMR) and robust execution capabilities. Revival in housing demand and SRL’s focus on cash flows should hold it in good stead. The company’s low gearing provides room to leverage its balance sheet and capitalise on attractive land purchase opportunities to grow its NAV. New project launches are a key stock catalyst, in our view. Maintain ‘BUY/SN’ with a target price of Rs 590/share (on a par with NAV of Rs 590.
