NEUTRAL - HDFC Sec

RESULTS REVIEW 3QFY20 28 JAN 2020

Prestige Estates Projects

NEUTRAL

HDFC securities Institutional Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters

Going all out We maintain NEU on PEPL with SOTP of Rs 358/sh (vs. Rs 348/sh earlier). We have increased our FY20/21E EPS estimates by 35%/18.9% to factor in better than expected deliveries in residential projects. PEPL posted strong 3QFY20 results.

HIGHLIGHTS OF THE QUARTER

PEPL reported 3QFY20 Revenue/EBIDTA of Rs 26.8/7.2bn. EBIDTA margin came in at 26.8% (vs 31.9/31.7% YoY/QoQ). APAT stood at Rs 1.6bn (179/+46% YoY/QoQ). Strong performance resulted in Rev/EBIDTA/APAT beat of 110/76/163% respectively vs. our estimates.

Steady 3QFY20 pre-sales and collections: PEPL gross pre-sales volume/value stood at 1.6mn sqft (+10% QoQ)/Rs 13.1bn (+28% QoQ, includes Rs 4.5bn commercial strata sales). The Company achieved 9MFY20 pre-sales value of Rs 33.5bn. The quarter saw strong collections of Rs 11.3bn with the total collections for 9MFY20 at Rs 33.3bn (~74% of the FY20 guidance).

BS concerns receding despite high leverage: Net debt has increased by Rs 2bn QoQ to Rs 86.7bn in 3QFY20. The Net D/E stands at 1.86x. However, (1) Recent allotment of preference shares to GIC for a consideration of Rs 4.2bn, (2) Likely fund raise of ~Rs25bn ($300-400mn, by Mar-20E) from -select PE investors pre-REIT, (3) REITs eventual listing in FY22E and (4) Further fund raise through equity dilution,

provides sufficient liquidity to PEPL capex plans while maintaining debt at current position, significantly improving the D/E structure.

Visibility improving in non-south regions: Prestige is undertaking expansion into non-south geographies like Delhi (DIAL Aerocity- Hotel + 0.65mn sqft office asset, PEPL stake 50%) and Mumbai (BKC-2mn sqft, PEPL stake 29.6%; Lokhandwala- 4mn sqft, PEPL stake 50%; Mulund- contender for residential development of 6mn sqft for a project admitted to NCLT). PEPL has entered into JDA with DB realty in these geographies where it will be responsible for execution and DB Realty would be responsible for liaisoning and statutory approvals.

STANCE PEPL is going all out (1) On building lease assets & (2) Increasing Non-South exposure with JV/JD tie ups. It’s banking on the consolidation theme and picking up distressed projects in non-south markets. Large capex outlays on new lease assets will be cash flow dilutive over next 3-4yrs and requires timely funding from existing lease assets monetization and deployment of capital in cash flow dilutive under construction projects. Office assets under construction/upcoming launches of 15/25mn sqft are aggressive with overall office portfolio expected to increase from 10mn sqft to 50mn sqft over next 5-6yrs. We retain NEU with increased (new leases addition) TP of Rs 358/sh.

Financial Summary (Consolidated)

YE March (Rs mn) 3QFY20 3QFY19 YoY (%) 2QFY20 QoQ (%) FY18 FY19 FY20E FY21E

Net Revenues 26,809 10,776 148.8 19,229 39.4 54,986 52,407 83,410 88,875

EBITDA 7,188 3,437 109.1 6,099 17.9 10,940 14,538 25,638 27,407

APAT 1,618 581 178.5 1,106 46.3 3,618 3,262 5,371 5,348

Diluted EPS (Rs) 4.3 1.5 178.5 2.9 46.3 9.6 8.7 14.3 14.3

P/E (x)

40.3 44.7 27.2 27.3

EV / EBITDA (x)

19.4 15.4 8.6 7.9

RoE (%)

10.2 9.8 19.1 17.9 Source: Company, HDFC sec Inst Research

INDUSTRY REAL ESTATE CMP (as on 27 Jan 2020) Rs 389 Target Price Rs 358 Nifty 12,119

Sensex 41,155

KEY STOCK DATA

Bloomberg PEPL IN

No. of Shares (mn) 375

MCap (Rs bn) / ($ mn) 146/2,041

6m avg traded value (Rs mn) 135

STOCK PERFORMANCE (%)

52 Week high / low Rs 426/193

3M 6M 12M

Absolute (%) 29.0 47.5 88.6

Relative (%) 24.1 38.9 74.4

SHAREHOLDING PATTERN (%)

Sep-19 Dec-19

Promoters 70.00 70.00

FIs & Local MFs 3.72 3.37

FPIs 25.34 25.69

Public & Others 0.94 0.94

Pledged Shares - -

Source : BSE

Parikshit D Kandpal, CFA [email protected] +91-22-6171-7317

Shrey Pujari [email protected] +91-22-6639-3035

Rohan Rustagi [email protected] +91-22-3021-2079

PRESTIGE ESTATES PROJECTS : RESULTS REVIEW 3QFY20

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Quarterly Financial Snapshot (Consolidated) Particulars (Rs mn) 3QFY20 3QFY19 YoY (%) 2QFY20 QoQ (%)

Net Sales 26,809 10,776 148.8 19,229 39.4

Material Expenses (16,913) (5,216) 224.3 (10,844) 56.0

Employee Expenses (1,239) (1,023) 21.1 (1,103) 12.3

Other Operating Expenses (1,469) (1,100) 33.5 (1,183) 24.2

EBITDA 7,188 3,437 109.1 6,099 17.9

Interest Cost (2,602) (1,792) 45.2 (2,640) (1.4)

Depreciation (1,655) (870) 90.2 (1,609) 2.9

Other Income (including EO) 154 255 (39.6) 398 (61.3)

PBT 3,085 1,030 199.5 2,248 37.2

Minority Interest 546 93 487.1 466 17.2

Share of associates 31 63 (50.8) 52 (40.4)

Tax (952) (419) 127.2 (728) 30.8

RPAT 1,618 581 178.5 1,106 46.3

E/o (adj for tax) - -

-

APAT 1,618 581 178.5 1,106 46.3

Source: Company, HDFC sec Inst Research

Margin Analysis (Consolidated)

MARGIN ANALYSIS 3QFY20 3QFY19 YoY (bps) 2QFY20 QoQ (bps)

Material Expenses % Net Sales 63.1 48.4 1,468 56.4 669

Employee Expenses % Net Sales 4.6 9.5 (487) 5.7 (111)

Other Operating Expenses % Net Sales 5.5 10.2 (473) 6.2 (67)

EBITDA Margin (%) 26.8 31.9 (508) 31.7 (491)

Tax Rate (%) 30.9 40.7 (982) 32.4 (153)

APAT Margin (%) 6.0 5.4 64 5.8 28


Real Estate Performance 3QFY20 3QFY19 YoY (%) 2QFY20 QoQ (%)

Overall Gross Sales (mn sqft) 1.6 1.6 3.9 1.5 10.3

Prestige Share (mn sqft) 1.3 1.2 8.3 1.2 11.0

Overall Gross Sales (Rs mn) 13,097 11,765 11.3 10,263 27.6

Prestige Share (Rs mn) 10,932 9,368 16.7 8,296 31.8

Gross Average Realization (Rs/sqft) 8,135 7,590 7.2 7,029 15.7

Collections - Prestige Share (Rs mn) 8,904 9,334 (4.6) 8,679 2.6


3QFY20 Revenue: Rs 26.8bn (+149/+39% YoY/QoQ, 110% beat). Beat driven by robust deliveries and recognition from earlier reversed sales, due to POCM to CCM accounting change

3QFY20 EBITDA: Rs 7.2bn (+109/18% YoY/QoQ, 76% beat). Margins came in at 26.8% (vs 31.9/31.7% YoY/QoQ)

PAT came in at Rs 1.6bn (+179%/46.3% YoY/QoQ, 163% beat)

Presales include Rs 4.5bn of commercial office strata sales. PEPL has not disclosed the realization for the same


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Strong pre-sales momentum continues

During 3QFY20, pre-sales increased 4% YoY to 1.61mn sqft (Prestige’s share-1.31mn sqft), with ~Rs 10.9bn in value (realization of Rs 8,345/sqft). Prestige’s rental income/quarter stood at Rs 2.34bn. Prestige has a pre-leasing target of 2.5mn sqft for FY20 of which it has achieved 60% of the pre-leasing target as of 9MFY20.

PEPL launched 1.84mn sqft of commercial projects in Bengaluru during 3QFY20 (9.72 mn sqft as of 9MFY20). PEPL has some key projects in the launch pipeline including Prestige Smart City (under the HDFC platform), Prestige Highline (Chennai), Finsbury Park (Bengaluru), Prestige Tranquil (Hyderabad), Mumbai (Byculla), projects in Mangaluru and Goa with a total developable area of ~31mn sqft.

Prestige Share - Sales Area and Value Trend (Rs mn) 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20

Overall Pre-Sales - PS (msf) 0.78 1.55 1.11 1.33 1.21 2.08 1.21 1.18 1.31

Overall Sales Value - PS (Rs mn) 5,231 10,482 7,638 7,974 9,368 11,222 8,614 8,296 10,932

Realisation (Rs/sf) 6,706 6,763 6,881 5,995 7,742 5,395 7,119 7,031 8,345

Collections - PS (Rs mn) 9,469 8,363 7,546 8,493 9,334 9,906 9,058 8,679 8,904

Rental Income - PS (Rs mn) 1,641 1,570 1,838 1,817 1,874 1,958 2,062 2,229 2,337

Source: Company, PS – Prestige Share

1.84mn sqft of commercial projects launched during 3QFY20 in Bengaluru During 3QFY20, PEPL share total pre-sales was 1.31mn sqft with ~Rs 10.9bn in value (realization of Rs 8,345/sq ft) Sales were driven by completed ready-to-move projects Prestige has achieved 60% of the pre-leasing target of 2.5mn sqft for FY20 PEPL has some key projects in the launch pipeline across Bengaluru, Hyderabad, Chennai and Mumbai with a total developable area of ~31mn sqft Ready unsold inventory stands at ~Rs 30bn of which about Rs 12bn is from Prestige Golfshire and White Meadows project


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Net D/E stands at 1.86x QoQ

For 3QFY20, consolidated net debt stands at Rs 86.7bn. Increase of Rs 2bn QoQ is on account of Rs 3.2bn of land capex, refundable deposits for JV/JDA and asset stake buyout for DIAL and BKC projects.

While we remain cautious of PEPL’s rising debt levels on account of outgo for land acquisitions and capex for annuity assets, we find comfort in the fact that debt is largely being backed by Rent securitization (about 60%). Residential debt is at 40% of total net debt.

With a ramp-up in rental income (Rs 2.33bn, +25% YoY) combined with monetization of residential inventory nearing completion and equity fund raise/pre REIT stake sale, PEPL will have multiple avenues of de-leveraging its balance sheet. We expect an improvement in D/E ratio FY20. However, the achievement of the FY20E targeted net D/E of 1.4x will pose a challenge.

Debt/Equity Ratio Trend (x)

(Rs mn) 3QFY18 4QFY18 *1QFY19 *2QFY19 *3QFY19 *4QFY19 *1QFY20 *2QFY20 *3QFY20

Consol Net Worth 47,947 49,627 41,100 41,695 42,348 43,386 43,541 44,275 46,510

Consol Net Debt 58,092 64,560 72,786 75,714 75,651 75,817 81,162 84,698 86,740

Consol Net D/E (x) 1.21 1.3 1.77 1.82 1.79 1.75 1.86 1.91 1.86

Source: Company, *1QFY19 onwards leverage ratios are not strictly comparable with previous quarters on account of reversal in reserves of Rs 10.1bn on adoption of IND AS 115

Change in Estimates

FY20E FY21E

Old New % Change Old New % Change

Revenues (Rs mn) 58,379 83,410 42.9 62,092 88,875 43.1

EBITDA (Rs mn) 18,191 25,638 40.9 19,410 27,407 41.2

EBIDTA Margins (%) 31.2 30.7 (1.5) 31.3 30.8 (1.5)

APAT (Rs mn) 3,978 5,371 35.0 4,499 5,348 18.9

Source: HDFC sec Inst Research

In addition to ramp-up in rental income and monetization of residential inventory, the company is exploring de-leveraging through capital churning in Retail and Hospitality business verticals. The company expects to make some progress on this front during 4QFY20 We have revised our FY20/21E EPS to factor in the performance during 9MFY20 where the company exceeded the management’s topline guidance of Rs 55bn during FY20. EBITDA margins are changed in line with the 9MFY20 margin


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Cash Flow situation PEPL Share (Rs bn) FY20E FY21E Comments

Inflows:

Customer collections 40.2 41.1

Rentals 8.7 10.6

Hospitality (net) 2.0 2.1

Property Management (net) 0.7 -

Other Income/Deposits 1.5 1.8

IPO/IPP Proceeds - -

Total inflow 53.1 55.6

Outflows:

Construction Outflow 23.3 29.2

Corporate And Staff 8.0 10.2

Construction/Overheads Total 31.3 39.4

Operational Cash Flows 21.8 16.2

Interest Payments 11.3 12.1

Income Taxes 3.4 3.4

Total Financial Outflows 14.7 15.5

Net Cash Flow – I 7.1 0.7

Total Annuity Asset Capex - II 6.4 7.6 Includes Office, Hotel and Retail capex

Cash Flow Post Capex III = I – II 0.7 (6.9)

Land Payments 2.3 2.2

Stake Buyouts (Exora and others) - -

Dividend Paid 0.5 0.5

Others - -

Capital Outflows IV 2.8 2.7

Net Inflows V = III –IV (2.1) (9.7)



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Summary Of Key Assumptions And Estimates

Estimates Comments

FY20E FY21E

Volume assumptions

Residential - Prestige share (mn sqft)

6.0 6.1 New pre-sales will come from existing unsold inventory in addition to new launches

Average rate (Rs/sqft) 6,454 6,551 Price realization will remain muted as unsold inventory puts pressure on pricing of new launches

Sales value - Prestige share (Rs mn) 38,721 39,963 Pre-sales to be driven by ~50% from the existing stock and the balance from new launches

Rental Income:

Gross area for lease (mnsf) 16.8 18.7

Prestige Share (mnsf) 12.5 13.0 Share split across economic interest Average Occupancy (%) 95.0 96.0

Prestige leased space (mnsf) 11.9 12.5 Multiplied by average occupancy Average Rental (Rs/sqft/month) 59.24 62.31 Rental growth in line with product mix Prestige share - rental income (Rs mn)

8,460 9,314 11.5% FY19-21E rental income CAGR

Earnings forecast

Residential Sales (Rs mn) 65,687 70,285 Residential sales will be driven by read-to-move unsold inventory Rental income (Rs mn) 8,460 9,314

Others (Rs mn) 9,264 9,276

Total 83,410 88,875

EBIDTA (Rs mn) 25,638 27,407

EBIDTA Margin (%) 30.7 30.8 Margins to expand on better realizations Net interest expense* 10,191 11,046 Interest increase in line with capex PAT (Rs mn) 5,371 5,348

PAT Margin (%) 6.4 6.0

EPS (Rs) 14.3 14.3 Cash flows forecast

CFO – a 24,736 28,526 CFI – b (11,670) (11,810) FCF - a+b 13,066 16,716

CFF-c (11,236) (14,091) Total change in cash - a+b+c 1,830 2,625


11.5% FY19-21E rental income CAGR Residential sales will be driven by ready-to-move unsold inventory


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Valuation SOTP valuation –TP at Rs 358/sh (Rs 348/sh earlier)

We have adopted the DCF methodology to arrive at

PEPL’s NAV/share. We value the residential real

estate business at Rs 144/share, commercial annuity

assets at Rs 214/share, retail assets at Rs 57/share,

hospitality at Rs 26/share, project management at Rs

12/share, land bank at Rs 43/share, net deposits to

land owners at Rs 23/share and reduced net debt at

Rs 161/share to arrive at a NAV valuation of Rs

358/share for the company.

The change in valuation factors in (1) Marginal re-

calibration of property prices and (2) Addition of new

lease assets.

For land bank beyond five years, we have valued it at

current market rates. We maintain NEU on PEPL with

SOTP valuation of Rs 358/share (vs Rs 348/sh

earlier).

Though elevated D/E position w.r.t. management

target remains a concern, fund raise prior to planned

REIT for the company’s yielding assets to the tune of

Rs 21bn and the eventual listing of REIT planned for

FY21, recent fund-raise from GIC to the tune of Rs

4.2bn and likely further stake dilution is likely to

maintain leverage within comfortable levels.

Rs mn Rs/share

(New) Comments

Residential - for sale 53,888 144 NAV based on the methodology discussed

Commercial – lease 80,194 214 NAV based on the methodology discussed

Retail – lease 21,495 57 NAV based on the methodology discussed

Hospitality 9,595 26 10x FY21E EV/EBIDTA

Project management 4,515 12 8x FY21E EV/EBIDTA

Land bank 16,286 43 At current market prices without incorporating construction margins

Deposits (net) 8,772 23 With the land owner for JDA

Total GAV (Rs mn) 1,94,745 519 Gross net asset value

Less: Net Debt – FY20E - Economic interest 60,333 161 Taken 80% PEPL share of the total net debt

NAV 1,34,412 358

NAV discount (%)

-

Final NAV

358


We value the residential real estate business at Rs 144/share Commercial annuity assets at Rs 214/share, retail assets at Rs 57/share, hospitality at Rs 26/share, project management at Rs 12/share Land bank at Rs 43/share and net deposits to land owners at Rs 23/share Adding all these we arrive at Gross Asset Value of Rs 519/sh We reduce net debt at Rs 161/share to arrive at total NAV valuation of Rs 358/share for PEPL and Maintain NEU


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Real estate development – NAV calculation methodology

We have divided PEPL’s entire land bank (with launch

visibility of the next five years) into residential

projects (based on the information given by the

company).

We have arrived at the sale price/sqft and the

anticipated sales volumes for each project based on

our discussions with industry experts.

We have deducted the cost of construction based on

our assumed cost estimates, which have been arrived

at after discussions with industry experts.

We have further deducted marketing and other costs

assumed at 5% of the sales revenue.

We have deducted income tax based on the tax

applicable for the project.

The resultant cash inflows at the project level have

been discounted, based on WACC of 14% (cost of

equity 17% based on beta of 1.5x and debt/equity

ratio of 0.67x). All the project-level NAVs have then

been summed up to arrive at the NAV of the

company.

For commercial office/retail space, we have

discounted rentals using 14% WACC for the

forecasted period and terminal value using the cap

rate of 8.5%.

For land beyond a five-year visibility, we have valued

at current market price.

We have valued hotels at 10x FY21E EV/EBIDTA and

the project management business at 8x FY21E

EV/EBIDTA

From the GNAV, we have deducted the net debt (80%

PEPL economic share) as of FY20E to arrive at the

NAV of the company.

We have used WACC assumption of 14% on account of high debt on books In commercial office/retail space, we have discounted rentals using 14% WACC for the forecasted period and terminal value using the cap rate of 8.5% We have valued hotel at 10x FY21E EV/EBIDTA and the project management business at 8x FY21E EV/EBIDTA We have taken PEPL’s share of economic interest in net debt at 80% to arrive at our NAV estimate of Rs 358/sh


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Key valuation assumptions

In the exhibit below, we highlight our sales and cost inflation forecasts. We expect property price appreciation in line with WPI inflation, i.e., 5%. We forecast other costs including marketing, SGA and employee costs at 5% of sales.

Base Case Assumptions (%) Discount Rate 14.0

Annual Rate Of Inflation-Sales Price 5

Annual Rate Of Inflation-Cost Of Construction 6

Other Costs – Marketing, SGA, Emp Cost (as % of sales) 5


In the exhibit below, we highlight our sales price and construction cost forecasts. Our pricing assumptions are moderate, and at a 0-10% discount to current prevailing prices.

Base Property Price And Construction Cost Assumptions

Location Prices

Rs/sqft Cost

Rs/sqft

Bangalore 4,300-10,000 3,000-3,500

Chennai 4,500-5,500 2,000-2,500

Kochi 4,500-8,500 2,500 -3,500

Hyderabad 4,200-6,000 2,000-2,500


NAV sensitivity analysis

Sensitivity to our assumption of property price

Obviously, our model is sensitive to changes in the assumptions regarding property prices. For every 1% change in the base property prices, the NAV will change by approximately 2.5%.

% Change In Sale Price (10) (5) 0 5 10

NAV/share (Rs) 269 314 358 402 447

Change In NAV (%) (24.8) (12.5) - 12.2 24.6


Sensitivity of NAV to changes in sales inflation

In our base case, we have assumed an annual sale price inflation of 5% (see exhibit above). For every 100bps increase in the annual sales price inflation, the NAV will increase by approximately 4.3%.

NAV Sensitivity To Change In Sales Inflation Sales inflation rates (%) 3 4 5 6 7

NAV/share (Rs) 325 343 358 374 393

Change in NAV (%) (9.3) (4.2) - 4.3 9.7


Sensitivity of NAV to changes in cost inflation

In our base case, we have assumed cost inflation to be 6% (see exhibit above). For every 100bps increase in construction cost inflation, the NAV will change by approximately 3.2%.

NAV Sensitivity To Change In Cost Inflation Cost Inflation Rates (%) 4 5 6 7 8

NAV/share (Rs) 379 370 358 347 338

Change in NAV (%) 5.8 3.3 - (3.2) (5.7)


The combined impact of a 100bps increase in sale price inflation and cost inflation will be a NAV increase of 1.1%.

We expect property price appreciation in line with WPI inflation, i.e., 5%. We forecast other costs including marketing, SGA and employee costs at 5% of sales

For every 1% change in the base property prices, the NAV will change by approximately 2.5% For every 100bps increase in the annual sale price inflation, the NAV will increase by approximately 4.3% For every 100bps increase in construction cost inflation, the NAV will change by approximately 3.2% The combined impact of a 100bps increase in sale price inflation and cost inflation will be a NAV increase of 1.1%


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Sensitivity of NAV to changes in discount rate

In our base case, we have assumed a discount rate of 14%. For every 100bps increase in the discount rate, the NAV will fall by 4.2%.

NAV Sensitivity To Change In WACC WACC Rates (%) 12.0 13.0 14.0 15.0 16.0

NAV/share (Rs) 387 372 358 344 330

Change In NAV (%) 8.0 3.9 - (4.2) (7.9)


For every 100bps increase in the discount rate, the NAV will fall by 4.2%


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Income Statement - Consolidated Year ending March (Rs mn) FY17 FY18 FY19 FY20E FY21E

Net Sales 47,745 54,986 52,407 83,410 88,875

Growth (%) (13.7) 15.2 (4.7) 59.2 6.6

Material Expenses 33,541 38,582 29,287 47,763 50,892

Employee Expenses 2,933 2,952 3,986 4,588 4,799

Other Operating Expenses 2,073 2,512 4,596 5,422 5,777

EBIDTA 9,198 10,940 14,538 25,638 27,407

EBIDTA (%) 19.3 19.9 27.7 30.7 30.8

EBIDTA Growth (%) (13.7) 18.9 32.9 76.4 6.9

Other Income 872 679 2,016 1,512 1,814

Depreciation 1,637 1,547 3,229 6,797 7,955

EBIT 8,433 10,072 13,325 20,353 21,267

Interest 3,160 3,827 7,228 10,191 11,046

PBT 5,273 6,245 6,097 10,162 10,221

Tax 1,600 2,135 1,985 3,354 3,373

PAT 3,673 4,110 4,112 6,809 6,848

Minority Interest -1,095 -533 -263 -1,598 -1,700

Share of associates 121 136 307 160 200

EO items (net of tax) 160 95 (894) - -

APAT 2,539 3,618 3,262 5,371 5,348

APAT Growth (%) (36.4) 42.5 (9.8) 64.6 (0.4)

EPS 6.8 9.6 8.7 14.3 14.3

EPS Growth (%) (36.4) 42.5 (9.8) 64.6 (0.4)


Balance Sheet – Consolidated Year ending March (Rs mn) FY17 FY18 FY19 FY20E FY21E

SOURCES OF FUNDS

Share Capital 3,750 3,750 3,750 3,750 3,750

Reserves 40,398 43,577 38,516 42,132 45,725

Total Shareholders Funds 44,148 47,327 42,266 45,882 49,475

Minority Interest 2,027 2,300 1,120 2,718 4,418

Secured 55,550 66,582 81,344 80,844 78,344

Unsecured 1,844 7,571 3,525 3,525 3,525

Total Debt 57,394 74,153 84,869 84,369 81,869

Deferred Taxes 1,722 1,745 -3,723 -3,723 -3,723

Other Non Current Liabilities 1,771 1,863 1,744 2,093 2,511

TOTAL SOURCES OF FUNDS 1,07,062 1,27,388 1,26,276 1,31,339 1,34,550

APPLICATION OF FUNDS

Net Block 6,124 12,849 19,957 26,460 31,805

CWIP 17,952 25,081 16,450 11,402 6,354

Goodwill 3,069 3,069 3,069 3,069 3,069

Investment Property 27,030 35,430 44,298 48,728 53,601

Other Non Current Assets 15,772 17,931 17,995 17,995 17,995

Investments, LT Loans & Advances 3,551 4,346 7,784 8,284 8,784

Inventories 66,919 57,127 1,31,501 1,89,743 2,02,173

Debtors 10,057 9,645 16,544 14,890 13,401

Cash & Equivalents 3,864 7,385 7,123 8,952 11,577

ST Loans & Advances, Others 13,964 16,162 15,887 16,360 16,846

Total Current Assets 94,804 90,319 1,71,055 2,29,945 2,43,997

Creditors 9,230 13,542 12,530 15,036 18,043

Other Current Liabilities & Provns 52,010 48,095 1,41,801 1,99,508 2,13,011

Total Current Liabilities 61,240 61,637 1,54,331 2,14,544 2,31,054

Net Current Assets 33,564 28,682 16,723 15,400 12,942

TOTAL APPLICATION OF FUNDS 1,07,062 1,27,388 1,26,276 1,31,339 1,34,550



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Cash Flow – Consolidated Year ending March (Rs mn) FY17 FY18 FY19 FY20E FY21E

PBT before minority 5,273 6,381 6,404 10,162 10,221

Non-operating & EO items (724) (689) (2,106) (1,352) (1,614)

Taxes (3,238) (2,844) (2,330) (3,354) (3,373)

Interest expenses 3,160 3,827 7,228 10,191 11,046

Depreciation 1,637 1,547 3,229 6,797 7,955

Working Capital Change (1,259) 664 (4,804) 2,291 4,292

OPERATING CASH FLOW ( a ) 4,849 8,886 7,621 24,736 28,526

Capex (8,671) (5,773) (7,439) (8,252) (8,252)

Free cash flow (FCF) (3,822) 3,113 182 16,484 20,274

Investments and Interest income 3,745 (5,778) 3,570 (3,418) (3,558)

INVESTING CASH FLOW ( b ) (4,926) (11,551) (3,869) (11,670) (11,810)

Share capital Issuance - - - - -

Debt Issuance 2,359 15,907 8,550 (500) (2,500)

Interest expenses (3,156) (3,937) (7,137) (10,191) (11,046)

Dividend - (541) (543) (545) (545)

FINANCING CASH FLOW ( c ) (797) 11,429 870 (11,236) (14,091)

NET CASH FLOW (a+b+c) (874) 8,764 4,622 1,830 2,625

Closing Cash & Equivalents 3,864 7,385 7,123 8,952 11,577


Key Ratios – Consolidated

FY17 FY18 FY19 FY20E FY21E

PROFITABILITY (%)

GPM 29.7 29.8 44.1 42.7 42.7

EBITDA Margin 19.3 19.9 27.7 30.7 30.8

APAT Margin 5.3 6.6 6.2 6.4 6.0

RoE 11.1 10.2 9.8 19.1 17.9

Core RoCE 8.4 8.9 11.0 16.9 17.1

RoCE 4.5 5.2 6.4 9.5 9.6

EFFICIENCY

Tax Rate (%) 30.3 34.2 32.6 33.0 33.0

Asset Turnover (x) 0.5 0.4 0.4 0.7 0.7

Inventory (days) 512 412 657 703 805

Debtors (days) 82 65 91 69 58

Payables (days) 70 76 91 60 68

Cash Conversion Cycle (days) 524 402 657 711 795

Debt/EBITDA (x) 6.2 6.8 5.8 3.3 3.0

Net D/E 1.21 1.41 1.84 1.64 1.42

Interest Coverage 2.7 2.6 1.8 2.0 1.9

PER SHARE DATA

EPS (Rs/sh) 6.8 9.6 8.7 14.3 14.3

CEPS (Rs/sh) 11.1 13.8 17.3 32.4 35.5

DPS (Rs/sh) 1.2 1.2 1.2 1.2 1.2

BV (Rs/sh) 117.7 126.2 112.7 122.4 131.9

VALUATION

P/E 57.5 40.3 44.7 27.2 27.3

P/BV 3.3 3.1 3.5 3.2 2.9

EV/EBITDA 21.7 19.4 15.4 8.6 7.9

OCF/EV (%) 2.4 4.2 3.4 11.2 13.2

FCF/EV (%) (1.9) 1.5 0.1 7.4 9.4

FCFE/Market Cap (%) (3.2) 10.3 1.1 4.0 4.6

Dividend Yield (%) 0.3 0.3 0.3 0.3 0.3



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Rating Definitions

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period

SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target

11-Jan-19 221 BUY 314

14-Feb-19 200 BUY 292

9-Apr-19 268 NEU 292

29-May-19 285 NEU 286

11-Jul-19 271 NEU 286

3-Aug-19 260 NEU 286

22-Sep-19 302 NEU 286

10-Oct-19 277 NEU 286

15-Nov-19 300 NEU 297

9-Jan-20 314 NEU 348

28-Jan-20 389 NEU 358

150

200

250

300

350

400

450

Jan

-19

Feb

-19

Mar

-19

Ap

r-1

9

May

-19

Jun

-19

Jul-

19

Au

g-1

9

Sep

-19

Oct

-19

No

v-1

9

De

c-1

9

Jan

-20

Prestige Estates TP

RECOMMENDATION HISTORY

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013 Board : +91-22-6171 7330 www.hdfcsec.com


Page | 14

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