Target: ₹452

CMP: ₹355.60

We initiate a bullish Buy rating on Puravankara Ltd (PURVA) based on the following factors: Presales to grow at 20%CAGR over FY23-26E, debt and debt coverage well under control, strong execution track record over the decade, Strong P&L recognition expected in next 5-7 years, paradigm shift in focus following onboarding of new CEO.

Residential real estate has witnessed a strong uptick in last 2-3 years wherein most tier-I developers have witnessed quick monetisation of project launches. PURVA significantly benefited from the ongoing demand which helped it monetised completed inventory at a very good pace and helped generate a strong cashflow. We believe company is on the right track now and will achieve strong presales in next 5-7years resulting in strong cashflow generation. Additionally, company is expected to expand its operations in new geographies like MMR & Pune.

Most important, with expanding execution, company is expected to manage debt in beer way with Net D/E coming down to 0.55x by FY26E on the back of a strong cashflow generation. We valued PURVA on SoTP based with residentials valued on an NPV-based NAV approach, at ₹6,510 crore, commercial at capitalisation rate of 10 per cent to ₹1,570 crore, land bank (₹2,760 crore) and business development at 25 per cent premium to residential porolio (₹1,620 crore).

We initiate coverage on PURVA with ‘BUY’ rating and 1 year forward target price of ₹452/share.