Embed Size (px)
Citation preview
CMP 391.00
Target Price 430.00
ISIN: INE484J01019
SEPTEMBER 20th
2013
GODREJ PROPERTIES LIMITED Result Update: Q1 FY14
BUYBUYBUYBUY
Index Details
Stock Data
Sector Realty
BSE Code 533150
Face Value 10.00
52wk. High / Low (Rs.) 640.08/373.10
Volume (2wk. Avg.) 5805
Market Cap (Rs. in mn.) 30519.11
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY13A FY14E FY15E
Net Sales 4267.10 4779.15 5257.07
EBITDA 2029.62 1901.82 2105.02
Net Profit 1226.68 1056.85 1161.51
EPS 15.72 13.54 14.88
P/E 24.88 28.88 26.28
Shareholding Pattern (%)
1 Year Comparative Graph
GODREJ PROPERTIES LTD S&P BSE SENSEX
SYNOPSIS
We initiated coverage of Godrej Properties Ltd with a target price of Rs. 430.00 for medium term investment.
Godrej Properties Limited operates as a real estate development company in India.
Revenue for the quarter rose by 32.87% to Rs. 1091.37 million from Rs. 821.36 million, when compared with the prior year period.
Net profit decreased to Rs. 140.85 million against Rs. 269.07 million in the corresponding quarter ending of previous year, a decrease of 47.65%.
During the quarter, the Company has added two projects with 1.85 million sq.ft of saleable area in New Delhi and Bengaluru.
In Q1 FY14, the Company’s total booking value of Rs. 6060 mn and total booking volume of 0.59 million sq. ft.
Godrej Properties has entered into an agreement to develop 37 acres in Panvel, Maharashtra.
During the quarter, Godrej Properties has acquired 49% equity stake in Godrej Estates Developers Pvt. Ltd from HDFC PMS.
Godrej Properties has entered into a Development Agreement with Oasis Buildhome Pvt. Ltd. to develop a 13.76 acre property in Gurgaon.
EBITDA is Rs. 385.75 million as against Rs. 539.14 million in the corresponding period of the previous year.
Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 13% over 2012 to 2015E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Godrej Properties Ltd 391.00 30519.11 15.72 24.88 2.27 40.00
DLF Ltd 151.60 269971.60 1.60 94.75 1.78 100.00
Sobha Developers Ltd 280.45 27502.00 20.74 13.52 1.30 70.00
Puravankara Projects Ltd 68.50 16244.80 4.97 13.78 1.02 25.00
Recommendation & Analysis - ‘BUY’
Godrej Properties Ltd has reported revenue of Rs. 1091.37mn, against Rs. 821.36 mn in the corresponding
quarter of previous year, registered a growth of 32.87% y-o-y. In Q1 FY14, the Company’s total booking value of
Rs. 6060 mn and total booking volume of 0.59 million sq. ft.. The Company was launched a flagship commercial
project at BKC, Mumbai in March 2013, and it was sold 0.137 million sq. ft. with a booking value of Rs. 3310 mn
in Q1 FY14. During the quarter, the Company has added two projects with 1.85 million sq.ft. of saleable area in
New Delhi and Bengaluru. Godrej Properties has entered into a Development Agreement with Oasis Buildhome
Pvt. Ltd. to develop a 13.76 acre property in Gurgaon. The Company has expanded its portfolio in Bengaluru with
addition of a new project with 1 million sq. ft. of saleable area under the development management fee model.
Godrej Properties has entered into an agreement to develop 37 acres in Panvel, Maharashtra. This new area is in
addition to and is contiguous with the 110 acres project the company had added to its portfolio in FY13; GPL will
receive 35% of the profits from the development.
Godrej Properties focusing for new business development will be in the high growth markets of Mumbai, NCR,
Bengaluru, Chennai and Pune for FY2014. Strategically, it has reduced their focus on commercial projects in Tier-
II cities and increased its overall emphasis on residential developments which require lower investments and
can be developed in a more capital efficient manner. The Company continues to expand its development portfolio
and signed two new deals in their target markets of Bangalore and NCR this quarter. Godrej Properties has
delivered strong YoY earnings and bookings growth despite adverse market conditions. We expect the company
to post a CAGR of 13% and 13% in its top-line and bottom-line respectively. Hence, we recommend ‘BUY’ for
‘Godrej Properties Ltd’ with a target price of Rs. 430.00 on the stock.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q1 FY14,
Godrej Properties Limited operates as a real estate
development company in India. The company
focuses on residential, commercial, and township
developments in India, reported its financial results
for the quarter ended 30th June, 2013.
Months Jun-13 Jun-12 % Change
Net Sales 1091.37 821.36 32.87
PAT 140.85 269.07 (47.65)
EPS 1.80 3.45 (47.66)
EBITDA 385.75 539.14 (28.45)
The company’s net profit decreased to Rs. 140.85 million against Rs. 269.07 million in the corresponding quarter
ending of previous year, a decrease of 47.65%. Revenue for the quarter rose by 32.87% to Rs. 1091.37 million
from Rs. 821.36 million, when compared with the prior year period. Reported earnings per share of the company
stood at Rs. 1.80 a share during the quarter, registering 47.66% decrease over previous year period. Profit before
interest, depreciation and tax is Rs. 385.75 millions as against Rs. 539.14 millions in the corresponding period of
the previous year.
Break up of Expenditure
Break up of Expenditure
Value in Rs. Million
Q1 FY14 Q1 FY13
Cost of Sales 771.54 461.44
Employee Benefit Expenses 50.03 23.21
Depreciation 10.07 7.87
Other Expenses 63.79 69.37
Total Expenditure 895.43 561.89
Latest Updates
• Godrej Properties had offered 21,538,388 equity shares of face value of Rs. 10/- each at a price of Rs. 325/-
per equity share for an amount aggregating to Rs. 700 crores on a rights basis to the existing shareholders.
The Company has closed subscription to its rights issue on September 11, 2013. Based on reports from the
Registrar to the Issue, the company has received full subscription to its rights issue.
• During the quarter, the Company has added two projects with 1.85 million sq.ft of saleable area in New Delhi
and Bengaluru.
• During the quarter, Godrej Properties has acquired 49% equity stake in Godrej Estates Developers Pvt. Ltd
from HDFC PMS. Consequently Godrej Estates Developers Pvt. Ltd has become a wholly owned subsidiary of
Godrej Properties Ltd.
• During the quarter, Godrej Properties has diluted 74.90% equity stake in Wonder Space Properties Pvt. Ltd
to Shubh Properties Co-operatief U.A and others for Rs. 6.45 millions
Sales Highlights
• In Q1 FY14, the Company’s total booking value of Rs. 6060 mn and total booking volume of 0.59 million sq. ft.
• Residential projects recorded booking value of Rs. 2240 mn and booking volume of 0.43 million sq. ft.
• Commercial projects recorded booking value of Rs. 3820 mn and booking volume of 0.16 million sq. ft.
• Godrej BKC, Mumbai
Flagship commercial project launched at BKC, Mumbai in March 2013, 0.137 million sq. ft. sold with a
booking value of Rs. 3310 mn in Q1 FY14.
• Godrej Garden City, Ahmedabad
Phase V (residential, retail & affordable housing units) launched in last week of March and in early April
2013, 0.24 million sq. ft. of sales recorded with a booking value of Rs. 810 mn in Q1 FY14.
Projects
� Godrej Properties increases the size of its Panvel project
Godrej Properties has entered into an agreement to develop 37 acres in Panvel. This new area is in addition
to and is contiguous with the 110 acres project the company had added to its portfolio in FY13. It will be
developed in partnership with the same landowners and at the same terms as the 110 acres parcel and will
not require any additional initial investment by Godrej Properties. GPL will receive 35% of the profits from
the development.
The Company will now have a total land parcel of 147 acres in Panvel. This combined project has an
estimated saleable area of 4.3 million square feet as per the current Special Township Policy. The project is
located between NH4 and the Mumbai – Pune Expressway.
� Godrej Properties adds a new project in NCR
Godrej Properties has entered into a Development Agreement with Oasis Buildhome Pvt. Ltd. to develop a
13.76 acre property situated on Northern Periphery Road in Sector 88A/89A, Gurgaon. The project will be
developed as a premium residential group housing project and is expected to offer 1.2 million sq. ft. of
saleable area.
COMPANY PROFILE
Godrej Properties Limited Established in 1990 and is headquartered in Mumbai, India, is the first real estate
company to have ISO certification. The company was formerly known as Godrej Properties and Investments
Limited and changed its name to Godrej Properties Limited in November 2004. Godrej Properties brings the
Godrej Group philosophy of innovation and excellence to the real estate industry. Godrej Properties is currently
developing residential, commercial and township projects spread across approximately 85 million square feet in
12 cities across India. To create landmark structures, Godrej Properties collaborates with outstanding associates
and reputed names. The company aims to deliver superior value to all stakeholders through extraordinary and
imaginative spaces created out of deep customer focus and insight. Godrej Properties Limited is a subsidiary of
Godrej Industries Limited.
Over the last few years, Godrej Properties has received over 40 awards and recognitions, including “Popular
Choice - Developer of the Year” award by ET NOW in 2013 and “Best Business Practice in Real Estate” for the
year 2012 by Accommodation Times.
FINANCIAL HIGHLIGHT (STANDALONE) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March31, 2012 -2015E
FY12A FY13A FY14E FY15E
SOURCES OF FUNDS (Rs.in.mn)
Shareholder's Funds
Share Capital 780.37 780.46 780.54 780.54
Reserves and Surplus 13215.46 12862.48 13919.33 15080.84
1. Sub Total - Net worth 13995.83 13642.94 14699.87 15861.38
Non Current Liabilities
Long term borrowings 1602.10 3460.92 3945.45 4316.32
Other Long term liabilities 0.12 2.77 3.32 3.82
Long Term Provisions 22.96 27.82 31.99 35.19
2. Sub Total - Non Current Liabilities 1625.18 3491.51 3980.77 4355.34
Current Liabilities
Short Term Borrowings 9586.65 4256.15 3745.41 3820.32
Trade Payables 1438.35 1088.10 979.29 900.95
Other Current Liabilities 1829.55 4773.53 5871.44 6458.59
Short Term Provisions 319.77 420.13 487.35 545.83
3. Sub Total - Current Liabilities 13174.32 10537.91 11083.49 11725.69
Total Liabilities (1+2+3) 28795.33 27672.36 29764.13 31942.40
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
Tangible assets 89.68 83.48 88.49 94.68
Intangible assets 22.84 37.02 45.90 51.87
Capital Work in Progress 222.13 440.98 551.23 617.37
Intangible assets under development 16.91 19.40 23.28 26.07
a) Sub Total - Fixed Assets 351.56 580.88 685.62 763.93
b) Non-current investments 995.24 1700.32 1955.37 2170.46
c) Deferred Tax Asset 29.86 40.58 35.71 32.14
d) Long Term loans and advances 655.68 763.04 846.97 914.73
e) Other non-current assets 9.05 108.19 123.34 135.67
1. Sub Total - Non Current Assets 2041.39 3193.01 3647.01 4016.93
Current Assets
Current Investment 58.65 0.00 0.00 0.00
Inventories 2573.57 6506.11 7482.03 8230.23
Trade receivables 1063.78 631.58 694.74 736.42
Cash and Bank Balances 4414.53 474.54 512.50 543.25
Short-terms loans & advances 16758.38 15393.89 15855.71 16648.49
Other current assets 1885.03 1473.23 1572.15 1767.08
2. Sub Total - Current Assets 26753.94 24479.35 26117.12 27925.47
Total Assets (1+2) 28795.33 27672.36 29764.13 31942.40
Annual Profit & Loss Statement for the period of 2012 to 2015E
Value(Rs.in.mn) FY12A FY13A FY14E FY15E
Description 12m 12m 12m 12m
Net Sales 3689.41 4267.10 4779.15 5257.07
Other Income 949.27 627.85 659.24 685.61
Total Income 4638.68 4894.95 5438.39 5942.68
Expenditure -2874.44 -2865.33 -3536.57 -3837.66
Operating Profit 1764.24 2029.62 1901.82 2105.02
Interest -688.43 -598.19 -687.92 -770.47
Gross profit 1075.81 1431.43 1213.90 1334.55
Depreciation -31.81 -35.38 -39.63 -43.98
Profit Before Tax 1044.00 1396.05 1174.28 1290.57
Tax -230.35 -169.37 -117.43 -129.06
Net Profit 813.65 1226.68 1056.85 1161.51
Equity capital 780.37 780.46 780.54 780.54
Reserves 13215.46 12862.48 13919.33 15080.84
Face value 10.00 10.00 10.00 10.00
EPS 10.43 15.72 13.54 14.88
Quarterly Profit & Loss Statement for the period of 31st
Dec, 2012 to 30th Sep, 2013E
Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13E
Description 3m 3m 3m 3m
Net sales 986.03 1501.91 1091.37 1244.16
Other income 191.22 -37.61 179.74 170.75
Total Income 1177.25 1464.30 1271.11 1414.91
Expenditure -658.89 -1072.03 -885.36 -940.59
Operating profit 518.36 392.27 385.75 474.33
Interest -189.95 18.50 -233.87 -196.45
Gross profit 328.41 410.77 151.88 277.88
Depreciation -8.90 -9.85 -10.07 -10.88
Profit Before Tax 319.51 400.92 141.81 267.00
Tax -41.55 -34.68 -0.96 -25.10
Net Profit 277.96 366.24 140.85 241.90
Equity capital 780.46 780.46 780.54 780.54
Face value 10.00 10.00 10.00 10.00
EPS 3.56 4.69 1.80 3.10
Ratio Analysis
Particulars FY12A FY13A FY14E FY15E
EPS (Rs.) 10.43 15.72 13.54 14.88
EBITDA Margin (%) 47.82% 47.56% 39.79% 40.04%
PBT Margin (%) 28.30% 32.72% 24.57% 24.55%
PAT Margin (%) 22.05% 28.75% 22.11% 22.09%
P/E Ratio (x) 37.50 24.88 28.88 26.28
ROE (%) 5.81% 8.99% 7.19% 7.32%
ROCE (%) 7.13% 9.67% 8.67% 8.95%
Debt Equity Ratio 0.80 0.57 0.52 0.51
EV/EBITDA (x) 21.13 18.60 19.82 18.11
Book Value (Rs.) 179.35 174.81 188.33 203.21
P/BV 2.18 2.24 2.08 1.92
Charts
OUTLOOK AND CONCLUSION
� At the current market price of Rs.391.00, the stock P/E ratio is estimated 28.88 x FY14E and 26.28 x FY15E
respectively.
� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 13.54 and Rs.
14.88 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 13% over 2012 to 2015E
respectively.
� On the basis of EV/EBITDA, the stock trades at 19.82 x for FY14E and 18.11 x for FY15E.
� Price to Book Value of the stock is expected to be at 2.08 x and 1.92 x respectively for FY14E and FY15E.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs.430.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
The Indian real estate and construction industry is an integral part of Indian economy and plays an important
role in the development of the country’s infrastructure base. The contribution of the real estate sector to India’s
gross domestic product (GDP) has been estimated at 6.3 per cent in 2013, and the segment is expected to
generate 7.6 million jobs during the same period. It is also expected to generate over 17 million employment
opportunities across the country by 2025.
The sector comprises of four sub-sectors- housing, retail, hospitality, and commercial. While housing contributes
to five-six percent of the country’s GDP, the remaining three sub-sectors are also growing at a rapid pace,
meeting the increasing infrastructural needs.
Riding high on the back of rapid urbanisation, positive demographics and rising income levels, the Indian real
estate sector has attracted significant investment over the past few years. The growing stability of the market is
reflected by the continuous growth of the core investors, with over Rs 7,705 crore (US$ 1.14 billion) invested in
ready office space during the last three years.
Market Dynamics
The real estate sector of India is expected to post annual revenues of US$ 180 billion by 2020 as compared to US$
66.8 billion in 2010-11, registering a compound annual growth rate (CAGR) of 11.6 per cent. In fact, the demand
is expected to grow at a CAGR of 19 per cent between 2010 and 2014, with tier I metropolitan cities projected to
account for about 40 per cent of this.
Mumbai, NCR and Bengaluru account for 46 per cent of total office space demand in India. Demand growth
projected to be the highest in Tier 2 cities such as Kolkata and Chennai during 2010-14.
Investments
The prime office space segment across the country’s key cities- Mumbai, the National Capital Region (NCR), Pune
and Bengaluru has witnessed a fresh supply infusion of more than 20 million square feet (sq ft) in the first six
months of 2013, witnessing a growth of 16 per cent on year-on-year (y-o-y) basis, as per a report by CBRE.
The country is ranked 20th among the top global markets for real estate investment in 2012, with investments
worth US$ 3.4 billion during the year, according to a latest report by Cushman & Wakefield. It is also estimated
that foreign direct investment (FDI) into real estate in India will increase to US$ 25 billion over the next 10 years.
Construction development sector (including townships, housing, built-up infrastructure & construction-
development projects) has attracted a cumulative FDI worth US$ 22,247.50 million from April 2000 to June
2013. FDI flows into the construction (infrastructure) activities during the period stood at US$ 2,198.77 million,
according to the department of industrial policy and promotion (DIPP).
Some of the major investments in the Indian real estate sector are:
• Peninsula Land has signed an agreement to buy a five-acre property in the Byculla area of Mumbai from
its joint owners, Mahindra Lifespaces, the realty arm of Mahindra Group, and the Kanorias, for around Rs
650 crore (US$ 96.45 million)
• Godrej Properties Ltd (GPL) has entered into an agreement to develop 37 acres in Panvel, Maharashtra.
The company will receive 35 per cent of the profits from the development
• Cushman & Wakefield has entered into an agreement to acquire Singapore-based project management
specialist company Project Solution Group (PSG). The acquisition is aligned with the firm's global
strategy to strengthen its operations in the Asia-Pacific
• Reliance Industries is expanding its presence in Africa's real estate sector. The firm acquired 10 prime
plots of land in Nairobi, Kenya, for around Rs 202 crore (US$ 29.97 million)
• Germany-based SEA Group, engaged in the living space solutions segment, plans to invest Rs 40 crore
(US$ 5.94 million) over the next two years in its Indian operations
Government Initiatives
In an attempt to encourage investors’ participation in the Indian housing sector, the Ministry of Housing and
Urban Poverty Alleviation plans to ease the norms for FDI in real estate projects. FDI upto 100 per cent is
allowed under the automatic route in townships, housing, built-up infrastructure and construction development
projects to increase investment, generate economic activity, create new employment opportunities and add to
the available housing stock and built-up infrastructure.
The Reserve Bank of India (RBI) has relaxed norms to raise funds via external commercial borrowings (ECB) for
low-cost affordable housing projects. Now, developers and builders with three years of experience in
undertaking residential projects are eligible to raise funds through the ECB route. RBI has also relaxed the
minimum paid-up capital norm for housing finance companies (HFCs) to raise funds through ECBs.
The Government of India has sanctioned projects worth Rs 41,723 crore (US$ 6.19 billion) for building of
1,569,000 houses/dwelling units for economically weaker/lower income group sections under the Ministry’s
flagship Jawaharlal Nehru National Urban Renewal Mission (JNNURM) programmes.
The Ministry of Housing & Urban Poverty Alleviation has planned to introduce a single-window system for
clearance of all real estate projects across the country. The system could bring down the average approval time
from the current 196 days to 45-60 days.
The government has also introduced the Real Estate Regulation Bill 2013 in the Parliament to set up a strong
regulatory architecture to protect the interest of consumers and for the regulation & promotion of the real estate
sector.
Some of the initiatives taken in the union budget 2013-14 include:
• For homes and flats with a carpet area of 2,000 square feet or more or of a value of Rs 1 crore (US$
148389.97) or more, which are high-end constructions, where the component of services is greater, rate
of abatement reduced from 75 to 70 percent
• Rs 6,000 crore (US$ 890.34 million) were given to Rural Housing Fund
• National Housing Bank plans to set up Urban Housing Fund. Rs 2,000 crore (US$ 296.78 million) will be
provided to the fund in the current financial year
Road Ahead
Given the current level of development and friendly government policies, India’s realty sector still has a long way
to go. Responding to an increasingly well-informed consumer and keeping in mind the globalisation of the Indian
business outlook, real estate developers have also shifted gears and accepted fresh challenges. The most marked
change has been the shift from family owned businesses to professionally managed ones.
A growing migrant population due to increasing job opportunities, together with healthy infrastructure
development, is underpinning demand in the region’s residential real estate market. Residential real estate in
India accounts for a huge 90-95 per cent of the real estate industry. According to estimates by Crisil, the demand-
supply gap in India’s housing sector will stand at 75.5 million units by the end of 2014. Demand is expected to be
boosted further due to India’s demographic dividend and the growing trend of nuclear families.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
C.V.S.L.Kameswari Pharma
U. Janaki Rao Capital Goods
B. Anil Kumar Diversified
Ashish.Kushwaha IT, Consumer Durable & Banking
Suhani Adilabadkar Diversified
M. Vinayak Rao Diversified
Firstcall India also provides
Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover
Offers, Offer for Sale and Buy Back Offerings.
Corporate Finance Offerings include Foreign Currency Loan Syndications,
Placement of Equity / Debt with multilateral organizations, Short Term Funds
Management Debt & Equity, Working Capital Limits, Equity & Debt
Syndications and Structured Deals.
Corporate Advisory Offerings include Mergers & Acquisitions(domestic and
cross-border), divestitures, spin-offs, valuation of business, corporate
restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &
Execution, Project Financing, Venture capital, Private Equity and Financial
Joint Ventures
Firstcall India also provides Financial Advisory services with respect to raising
of capital through FCCBs, GDRs, ADRs and listing of the same on International
Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and
other international stock exchanges.
For Further Details Contact:
3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071
Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089
E-mail: [email protected]
www.firstcallindiaequity.com
