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26 SEP 2016
REAL ESTATE
Rs 123
Target Price
Rs 171
Nifty
8,723
Sensex
28,294
KPDL IN
76
9/140
19
Rs 187/96
3M
6M
12M
Absolute (%)
(2.9)
13.1
(23.8)
Relative (%)
(10.1)
1.4
(33.2)
74.54
0.03
FIIs
11.80
13.63
Source : BSE
Parikshit Kandpal
parikshitd.kandpal@hdfcsec.com
+91-22-6171-7317
Eyeing A Comeback
Over last 1-yr, Kolte Patil Developers Ltd (KPDL) has
underperformed BSE Realty Index by ~40%. Exit of
incumbent CEO, change in top leadership and weak
real estate markets impacted new launches,
resulting in KPDL achieving lowest presales (FY16 2mn sqft) in last 5yrs.
Whilst the strategic implication of these changes
take time to reflect we see visible greenshots in (1)
Incremental contribution from Mumbai projects (2)
Strong pre-sales during 1QFY17 (3) Expected
deleveraging on back of cash flow surplus of Rs 1.31.5bn/yr, and (4) Positive impact on volumes owing
to 7-10% property price correction across portfolio.
A fully approved saleable area of ~10.9mn sqft lends
visibility to KPDLs FY17-19E pre-sales pipe. We
maintain BUY with reduced NAV based TP of Rs
171/sh (our valuation is based on 0.75x our endFY18E NAV forecast). Target Price reduction is on
back of (1) 5-10% base property price correction (2)
Net debt expansion, and (3) Higher NAV discount.
FY17E Pre Sales Recovery - Key Tailwind: Post
exit of Mr. Sujay Kalele (3QFY16), KPDL took time
to consolidate its market positioning. With delay
in few launches and a tough real estate market the
presales momentum got impacted, resulting in 5yr low presales of ~2mn sqft during FY16. The new
management team is laying emphasis on growth
with (1) Focus on inventory monetization even if it
has to offer discounts (2) Optimal spend on
marketing (3) Limited new land acquisition & (4)
FY15
6,966
2,044
653
8.6
15.3
7.9
14.2
6.2
FY16
6,854
1,842
591
7.8
11.9
6.9
15.6
7.8
FY17E
8,155
2,252
735
9.7
12.9
8.1
12.6
6.1
FY18E
9,490
2,734
1,023
13.5
15.3
10.4
9.0
4.8
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
correction can drive up pre-sales volume by 1520%. This can happen either through direct
developer discounts or 100bps reduction in
mortgage costs. KPDL has already passed about
7% discount on new launches and any reset of
mortgage pricing lower will provide further
catalyst to presales growth.
2Q
FY15
3Q
FY15
4Q
FY15
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
0.64
3,898
6,090
1.00
6,000
5,976
0.50
3,003
6,057
0.46
2,822
6,174
0.52
3,040
5,846
0.57
3,790
6,649
CAGR
FY1618E
0.66
2.05
2.39
2.82
17.4
3,704 12,655 13,781 16,315
(3.3)
5,612 6,173 5,755 5,777
13.5
1Q
FY17
FY16
FY17E
FY18E
Page | 2
Proforma Cashflows
Rs mn
Real Estate Collections
Construction Spend
Operating Cash flows - Dev Co
Employee+Other Expenses
Taxes
Total OCF
Less: Assets Capex
Less: Land Capex
Net OCF
Less: Interest Outgo
FCFE
Other Income
Net Surplus
FY17E
9,200
5,200
4,000
1,226
528
2,247
100
200
1,947
766
1,181
161
1,342
FY18E
10,120
5,720
4,400
1,386
735
2,280
100
250
1,930
653
1,277
169
1,447
Page | 3
FY17E
3,280
4,040
6,070
5,930
7,640
(1,160)
(1,160)
(1,030)
(1,030)
(1,970)
370
140
520
80
650
240
820
30
680
400
Net debt
1,610
2,280
4,150
4,050
4,590
4,594
Net Worth
Net Debt/ equity (x)
8,600
0.19
8,740
0.26
8,970
0.46
8,770
0.46
8,860
0.52
9,420
0.49
Structure NCD's
Cash
Current investments
FY18E Comments
Debt increase on account of Corolla
stake purchase, Premium towards TDR
purchase and Mumbai projects
expansion
Deducting NCD & CCD as they are equity
structured as debt by KPDL and JVs
Page | 4
Ongoing Projects
Life Republic - Phase 1, R3
avenue
Corolla - Phase 1 & 2
Hinjewadi, Pune
0.4
Wagholi, Pune
0.7
3,632
Giga Residency
0.3
11,858
Wakad
Wakad, Pune
0.9
6,387
Jazz - I & II
Aundh, Pune
Hennur Road,
Bengaluru
Horamavu,
Bengaluru
0.5
6,646
0.3
3,410
0.4
4,565
0.6
5,510
Kothrud, Pune
0.5
4.5
10,785
Forthcoming Projects
Life Republic - Phase II,
including R1
Corolla - Phase 3
Hinjewadi, Pune
2.0
5,000
Wagholi, Pune
1.3
Wakad
Wakad, Pune
1.3
6,200
Stargaze - Phase 2
Bavdhan, Pune
0.6
6,224
Downtown
Kharadi, Pune
0.5
7,017
Kondhwa - Phase 3
Kondhwa, Pune
0.4
0.4
5,012
24K Province
Total
6.4
Ragga
Mirabilis
mn sqft
Exente
KP Towers
Total
Avg Realization
Comments
(Rs/sqft)
Project
Grand Total
Source: Company, HDFC sec Inst Research
4,444
10.9
Change in Estimates
Revenues (Rs mn)
EBITDA (Rs mn)
APAT (Rs mn)
EPS (Rs)
FY17E New
8,155
2,252
735
9.7
FY17E Old
11,451
3,195
1,341
17.7
% Change Comments
(28.8) Slow sales velocity to delay revenue recogs.
(29.5)
(45.2) High interest costs to impact profitability
(45.2)
Page | 5
FY15
FY17E
Growth (%)
FY16E
FY17E
Comments
Volume assumptions
We forecast FY16-18E pre-sales CAGR of 17.4% on back
of existing unsold inventory of 6.2 mnsqft. KPDL may
17.9 deliver FY17E presales guidance beat (2.4mn sqft) if it
gets launch approval of 1mn sqft in LR and 1mn sqft in
Corolla by 4QFY17E
Realisation to correct 7-10% across project as newer
0.4 phases may get launched at discount to existing prices
so as to achieve high presales volume
18.4 Sharp uptick in new sales during FY18E
2.1
2.4
2.8
16.8
Residential (Rs/sqft)
6,173
5,755
5,777
(6.8)
12,655
13,781
16,315
8.9
6,854
8,155
9,490
19.0
16.4
1,842
2,252
2,734
22.3
21.4
26.9
27.6
28.8
74bps
119bps
591
766
653
29.5
(14.7)
591
735
1,023
24.4
39.2
8.6
7.8
9.0
9.7
10.8
13.5
40bps
24.4
177bps
39.2
1,368
1
1,369
(1,604)
1,437
29
1,466
(1,313)
(235)
153
Total pre-sales
FY16E
Earnings forecast
Page | 6
Rs mn
New NAV
Old NAV
Gross NAV
21,833
26,320
(4,594)
47.6
17,286
76
228
25%
171
(3,401)
22,919
76
302
15%
257
Page | 8
%
17
5
6
15
33
Base Property
Assumptions
Price
And
Location
City
Wagholi
Hinjewadi
Kharadi
Undri-NIBM
Mohamad Wadi
Aundh Annexe
Boat Club Road
Kondhwa
Viman Nagar
Aundh
Kalyani Nagar
Bavdhan
Atria
Wakad
Andheri
Vile Parle
Koramangla Block III
Hosur Road
Kannur Road
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Pune
Mumbai
Mumbai
Bangalore
Bangalore
Bangalore
Construction
Prices
Rs/sqft
3,750
5,000
5,100
4,500
4,500
5,200
9,100
4,000
8,900
6,900
7,800
4,700
7,400
5,500
14,500
20,000
6,700
5,900
3,800
Cost
Cost
Rs/sqft
1,800
2,100
2,200
2,200
2,200
2,500
3,500
2,000
3,500
2,600
2,800
2,000
2,800
2,500
7,500
9,500
2,400
2,300
1,800
Page | 9
% change in sale
price
NAV/share (Rs)
Change in NAV (%)
(10)
(5)
10
125
148
(27.1) (13.4)
171
-
194
13.5
216
26.1
148
(13.4)
160
(6.7)
171
-
183
6.9
195
13.7
4
187
9.2
5
179
4.6
6
171
-
7
163
(4.5)
8
156
(9.1)
15
177
3.3
16
174
1.6
17
171
-
18
168
(1.7)
19
165
(3.5)
Page | 10
FY14
7,642
5.1
4,617
292
524
2,208
28.9
15.0
152
71
2,289
457
1,832
663
1,169
(249)
920
(14.3)
12.1
(14.3)
FY16
6,854
(1.6)
3,869
423
720
1,842
26.9
(9.9)
147
116
1,873
591
1,282
529
753
(162)
591
(9.6)
7.8
(9.6)
FY17E
8,155
19.0
4,677
474
751
2,252
27.6
22.3
161
140
2,274
766
1,508
528
980
(245)
735
24.4
9.7
24.4
FY18E
9,490
16.4
5,371
522
864
2,734
28.8
21.4
169
152
2,752
653
2,099
735
1,364
(341)
1,023
39.2
13.5
39.2
FY14
FY15
FY16
FY17E
FY18E
758
7,297
8,055
1,740
3,131
235
3,366
(37)
13,124
758
7,657
8,415
1,926
3,387
398
3,785
(60)
14,065
758
8,016
8,774
2,886
5,932
5,932
(66)
17,527
758
8,663
9,420
3,131
5,182
5,182
(66)
17,668
758
9,576
10,333
3,472
4,632
4,632
(66)
18,372
903
150
218
154
12,694
851
691
3,028
17,264
1,105
4,460
5,565
11,699
13,124
972
109
218
61
14,672
1,009
405
3,922
20,008
1,175
6,127
7,302
12,706
14,065
1,066
126
1,192
28
17,382
1,418
823
3,517
23,139
1,400
6,625
8,024
15,115
17,527
1,066
126
1,192
48
18,096
1,452
588
3,648
23,785
8,548
8,548
15,237
17,668
1,034
126
1,192
68
19,501
1,690
742
4,050
25,983
10,030
10,030
15,952
18,372
Page | 11
FY15
1,621
(106)
(595)
440
101
(1,116)
344
(144)
200
148
4
239
(527)
(246)
(534)
(186)
691
505
FY16
1,282
(121)
(622)
591
116
(1,027)
219
(215)
4
(1,517)
(1,732)
2,770
(528)
(421)
1,822
310
405
715
FY17E
1,508
(161)
(528)
766
140
(357)
1,368
(140)
1,228
141
1
(750)
(766)
(89)
(1,604)
(235)
823
588
FY18E
2,099
(169)
(735)
653
152
(562)
1,437
(120)
1,317
149
29
(550)
(653)
(110)
(1,313)
153
588
742
FY14
FY15
FY16
FY17E
FY18E
39.6
28.9
30.0
12.0
11.7
20.8
19.2
45.5
29.3
29.6
9.4
7.9
17.4
15.3
43.5
26.9
27.3
8.6
6.9
11.6
11.9
42.6
27.6
27.9
9.0
8.1
15.5
12.9
43.4
28.8
29.0
10.8
10.4
18.3
15.3
36.2
0.6
538
39
48
528
1.5
0.3
5.0
37.2
0.5
717
49
60
706
1.9
0.4
4.7
41.2
0.4
854
65
69
850
3.2
0.58
3.2
35.0
0.5
794
64
66
792
2.3
0.49
3.0
35.0
0.5
723
60
62
721
1.7
0.38
4.2
12.1
13.1
3.1
106.3
8.6
9.9
1.3
111.1
7.8
9.3
1.2
115.8
9.7
11.6
1.5
124.3
13.5
15.5
2.0
136.4
10.0
1.1
5.4
(9.8)
(12.1)
2.8
2.5
14.2
1.1
6.2
2.7
1.6
4.7
1.1
15.6
1.1
7.8
1.5
0.0
30.0
1.0
12.6
1.0
6.1
0.1
8.9
5.2
1.2
9.0
0.9
4.8
0.1
10.0
8.3
1.7
Page | 12
RECOMMENDATION HISTORY
Kolte-Patil
Date
6-Nov-15
26-Sep-16
TP
280
CMP
166
123
Reco
BUY
BUY
Target
257
171
230
180
130
Rating Definitions
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
80
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
Page | 13
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