May 30, 2024: Real estate developer Prestige Estates Projects (PEPL) reported bookings of Rs 47b in 4QFY24, up 21% YoY (in line) aided by sustained demand across ongoing projects, according to an official release. In FY24, PEPL achieved record bookings of Rs 210 b, up 63% YoY. Of these, around Rs 155 b came from new launches. In FY24, it also achieved the highest-ever launches of 31 million square foot (msf) in residential business with a GDV of Rs 210b.
Sales volume was at 4 msf and realisation improved 18% YoY to Rs 11,400 per sqft. In FY24, volume grew 34% YoY and realisation was up 21% YoY to Rs 10,400 per sqft. The strong bookings traction is expected to continue in FY25 as PEPL has unveiled a launch pipeline of around 60 msf with a GDV of Rs 600b. It is targeting a pre-sales of Rs 260b, implying an increase of 25% YoY.
Total collections in 4Q increased 30% YoY/14% QoQ to Rs 41b and the company generated an OCF of Rs 18b. It incurred a capex of Rs 6b in the annuity segment and spent Rs 19b towards land/TDR investments. Net debt increased Rs 8b sequentially to Rs 78b, with net D/E at 0.7x.
Revenue was down 18% YoY/up 21% QoQ to Rs 21.6b (in line) but EBITDA increased 21% YoY to Rs 8.3b, aided by around 12pp rise in EBITDA margin to 38%. Adj. PAT decreased 70% YoY to Rs 1.4 b due to lower other income and higher finance costs. In FY24, revenue declined 5% YoY to Rs 79 b, while EBITDA rose 20% YoY to Rs 25b. Adj. PAT was Rs 7.1b (flat YoY).
PEPL reported rental income of Rs 1.3b, up 30% YoY and EBITDA stood at Rs 0.8b with a margin of 58% (vs 82% in 3QFY24). In FY24, rental income grew 86% YoY to Rs 5.4b and EBITDA was up 119% YoY to Rs 3.8b. The company expects to achieve a rental income of Rs 9b by the end of FY25.
With 24 msf of ongoing office and retail projects and an additional 14 msf of upcoming projects, rental income is expected to rise to Rs 38 b, once these projects are delivered by the end of FY28.
PEPL sees revenue growth of 27% in hospitality segment
In the hospitality segment, revenue grew 27% YoY to Rs 2.4b, and EBITDA came in at Rs 1b, up 20% YoY, with a margin of 41%. PEPL currently has an ongoing and upcoming portfolio of around 1,700 keys and the segment can generate steady-state revenue of Rs 25b.
Despite a higher base of Rs 210b, management is confident of achieving 25-30% growth (Rs 260b) in bookings in FY25, driven by a vast launch pipeline of Rs 600b. Timely launches can also enable it to comfortably exceed the guidance.
The spending towards BD will continue to be at Rs 35-40b including pending land payments. The company has recently acquired a large project in Pune, where it intends to build its flagship Prestige City project. It also has a strong BD pipeline in Hyderabad, Chennai and NCR.
The capital will be used to develop four large projects – one each in Bangalore, Goa, Mumbai and NCR. PEPL has so far received Rs 5b, which will be used to retire the debt in the Ocean Towers project in Mumbai. The balance will be spent on acquiring land in Delhi and Goa, since Bangalore and Mumbai projects are already tied up.
Capex and leverage
PEPL expects to incur a capex of Rs 25-30b in FY25. However, given the significant scale-up in residential cash flows along with ADIA fund, management is confident of reducing the D/E by the end of FY25.
Valuation and view
The launch pipeline of Rs 600b has significantly improved the growth visibility in the near term, and with higher spending on BD, progress on project acquisitions is expected to continue, which will further strengthen its residential business. Additionally, as the company advances on its key commercial projects, further value creation is imminent.
We raise our pre-sales by 8%/15% for FY25E/26E as we incorporate higher launches. Reiterate BUY with an increased TP of Rs 1,825, indicating a 21% upside potential.
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