Add Prestige Estates, target price Rs 250: ICICI Securities

ICICI Securities has given an add rating to Prestige Estates Projects with a target price of Rs 250. The share price moved up by 1.88 per cent from its previous close of Rs 220.90. The stock’s last traded price is Rs 225.05.

Owing to the Covid-19 impact, the brokerage expects Prestige Estates Projects’ (PEPL) operations to see significant near-term impact as weaker incremental office leasing, ongoing mall shutdowns, delay in residential launches and drop in hotel occupancies impact cash flows. The brokerage remains bullish on the company’s long-term prospects and believes that Prestige Estate can clock rental income of over Rs 9 billion in FY22E (estimated enterprise value of Rs 99 billion) which acts as a cushion to consolidate net debt levels of Rs 82 billion.

Investment Rationale

The company’s focus on affordable/mid-income housing projects in South India and expected recovery in hotel business in FY22E will enable the company to get its growth story back on track. The brokerage has cut its rating to add from buy with an unchanged target price of Rs 250/share post the 60 per cent run up in stock price in the last one month.

For FY20, Prestige Estate clocked gross sales bookings of Rs 46 billion which was 10 per cent below the lower end of its FY20 gross sales booking guidance of Rs 50 billion. With residential sales expected to take a hit in H1FY21 owing to Covid-19 impact, the brokerage has built in PEPL share of bookings worth Rs 22 billion in FY21E (down 40 per cent year on year) and Rs 26 billion in FY22E. Collections are expected to be weak in the first half of FY21 with pick up expected from Q3FY21.

Earnings Statement

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 1982.30 crore, down -26.06 per cent from last quarter sales of Rs 2680.90 crore and up 0.15 per cent from last year's same quarter sales of Rs 1979.30 crore. The company reported net profit after tax of Rs 59.50 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 2.11 per cent stake in the company as of March 31, 2020, while FIIs held 21.59 per cent, DIIs 22.8 per cent and public and others 53.5 per cent.