Target: ₹630

CMP: ₹487.80

Prestige Estates (PEPL) registered the highest-ever annual presales of ₹12,900 crore (+24 per cent year-on-year) on the back of 16 million sq ft (msf) of launches and robust pre-sales in Mumbai Metropolitan Region (MMR) at ₹2,700 crore. On the back of this, non-Bengaluru sales increased to 41 per cent from 20 per cent in FY22.

For FY24, it expects to achieve 25 per cent growth in annual pre-sales over FY23. It expects to achieve this on the back of a strong launch pipeline of 76 msf with higher contribution expected from Mumbai MMR and Hyderabad along with Bengaluru (sales of which was subdued on account of lower new launches).

In two significant transactions, PEPL acquired the balance stake in BKC and Mahalaxmi project from DB realty for ₹900 crore and ₹200 crore respectively. The total project cost in these two projects is ₹7,500 crore, of which PEPL has incurred ₹3,000 crore (including ₹1,100-crore stake buy).

For the BKC project, PEPL expects an increase in rental from ₹325 per sq ft per month to ₹350 per sq ft per month and cap rate compression to 8 per cent from 9.5 per cent (at the valuation stage).

These two factors are expected to provide a valuation upside potential of ₹3,500 crore. On account of this transaction, net debt increased to ₹5,570 crore, from ₹4,170 crore in December 2022. Consequently, net D/E is at 0.54x (0.42x in March 2022). Gross debt stands at ₹7,500 crore (vs ₹6,300 crore on December 22).

To maintain the growth momentum, PEPL is targeting residential business development of ₹20,000 crore annually and may launch its first project in NCR subject to timely approvals. We maintain BUY, with an unchanged SOTP-based TP of INR 630/share.