BUY CMP 90.10 Target Price 125.00 KOLTE-PATIL DEVELOPERS LTD. Result Update: Q3 FY14 MARCH 25 th 2014 ISIN: INE094I01018 Index Details Stock Data Sector Realty BSE Code 532924 Face Value 10.00 52wk. High / Low (Rs.) 109.00/49.40 Volume (2wk. Avg.) 96000 Market Cap (Rs. mn.) 6827.33 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY13A FY14E FY15E Net Sales 7274.80 6076.70 6988.20 EBITDA 2285.89 1907.63 2055.76 Net Profit 1074.41 698.26 702.46 EPS 14.18 9.21 9.27 P/E 6.35 9.78 9.72 Shareholding Pattern (%) 1 Year Comparative Graph KOLTE-PATIL DEVELOPERS LTD. S&P BSE SENSEX Highlights Kolte-Patil Developers Ltd. (KPDL) is among the top premier league of real estate developers in India is headquartered in Pune. The company s net profit stood at Rs. 204.01 million from Rs. 305.17 million over the corresponding quarter last year. The company has reported an EBITDA of Rs. 591.81 for Q3 FY14 as against Rs. 720.86 in the corresponding quarter of the previous year. Net Sales or income from operations stood at Rs. 1881.39 million in current December quarter from Rs. 2254.31 million in the corresponding quarter of the previous year, declining by 16% YOY. Earning Per Share stood at Rs. 2.69 in Q3 FY14 from Rs. 4.03 in Q3 FY13. CRISIL Ratings has assigned CRISIL A+/Stable ' rating to the long-term bank facilities and nonconvertible debentures of Kolte-Patil Developers Ltd. The value of area sold stood at Rs. 2530 mn in Q3 FY14 as compared to Rs. 2600 mn in Q2 FY14 and Rs.2500 mn in Q3 FY13. Kolte-Patil Developers Ltd completes the acquisition of 34 acre land parcel in Wakad, Pune for Rs. 3500 mn. Net Sales and PAT of the company are expected to grow at a CAGR of 41% and 44% 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 (%) Kolte-Patil Developers Ltd. 90.10 6827.33 14.18 6.35 0.95 15.00 National Bldg Const. Corp. Ltd. 158.40 18972.00 19.77 8.00 2.00 37.50 Prestige Estates Projects Ltd. 165.50 57925.00 9.54 17.35 2.14 12.00 GODREJ PROP 184.00 36569.40 4.69 39.14 1.77 40.00
QUARTERLY HIGHLIGHTS (CONSOLIDATED) Results updates- Q3 FY14 Rs. In Mn Dec-13 Dec-12 % Change Net Sales 1881.39 2254.31-16.54% PAT 204.01 305.17-33.15% EPS 2.69 4.03-33.15% EBITDA 591.81 720.86-17.90% Kolte-Patil Developers Ltd. achieved a turnover of Rs. 1881.39 million for the 3 rd quarter of the current year 2013-14 as against Rs. 2254.31 millions in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 591.81 millions and a net profit of Rs. 204.01 million against Rs. 305.17 million reported respectively in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 2.69 for the 3 rd quarter as against an EPS of Rs. 4.03 in the corresponding quarter of the previous year. Break up of Expenditure Rs. In Million Q3 FY14 Q3 FY13 CHNG % Cost of Construction 1103.95 1436.20-23% Admn and General Exp 78.97 62.44 26% Employee Cost 84.78 72.29 17% Selling Expenses 41.06 46.46-12% Dep& Amortz Exp 12.87 16.28-21%
Revenue in Key Projects Projects (Rs. Million) Q3 FY14 Q2 FY14 Life Republic - Phase I 470 630 Corolla - Phase I 100 190 Tuscan - Phase I & II 190 110 Margosa Heights I & II 180 230 Downtown - Phase I 410 100 Gliteratti I 160 110 City Bay 20 70 Green olive Venture 20 20 Others 330 430 Latest Updates Kolte-Patil Developers Ltd completes the acquisition of 34 acre land parcel in Wakad, Pune for Rs. 3500 mn. Kolte-Patil Developers Limited has expanded its presence in Mumbai by signing two new redevelopment projects in Western Suburbs. JayVijay CHSis the first project located at Ville Parle East, having a total plot size of 8,979 square meters with the total area of approximately 3.4 lakh square feet. The second project, Jumbo Darshan, is located in Andheri East, with a total plot size of 7,077 square meters and a total area of the approximately 2.6 lakh square feet. CRISIL Ratings assigned CRISIL A+/Stable ' rating to the long-term bank facilities and non-convertible debentures of Kolte-Patil Developers Ltd (KPDL). The Company recorded new sales bookings of 0.44 msf. in Q3 FY14 as compared to 0.44 msf recorded in Q2 FY14 and 0.5 msf. in Q3 FY13. The value of area sold stood at Rs. 2530 mn in Q3 FY14 as compared to Rs. 2600 mn in Q2 FY14 and Rs.250 crore in Q3 FY13. The average sales price realization stood at Rs, 5,730 per sq. ft. in Q3 FY14 as compared to Rs. 5,738 per sq. ft. in Q2 FY14 and Rs. 5,000 per sq. ft. In Q3 FY13.
9 Month Highlights Net revenues for 9M FY14 stood at Rs. 5930 mn, up 15% YoY as compared to Rs. 5180 mn in 9M FY13. EBITDA was higher by 45% YoY at Rs. 1810 mn with margins improving 630 bps YoY. PAT for 9M FY14 stood at Rs. 790 mn, higher by 27% YOY. EPS for the nine month period stood at Rs. 10.42 as compared to Rs. 8.24 recorded in the same period last year. COMPANY PROFILE Kolte-Patil Developers Ltd. is a leading Pune-based real estate company incorporated in 1991. KPDL has created a remarkable difference by pioneering new lifestyle concepts, leveraging cutting edge technology and creating insightful designs. KPDL s extensive spectrum of creations spans across multiple segments like residential projects, business and retail properties, IT Parks, Integrated Townships and Hospitality Infrastructure. Its core business operations feature varied aspects of construction business, such as location identification, acquisition, project planning, designing and development. The company is a well-reputed, trusted name with a reputation for high quality standards, design uniqueness, transparency and the delivery of projects in a timely manner. The company has been accredited in the real estate and construction industry with an ISO 9001 (2008 series) certification since May 2002. The company has developed and constructed 42 projects including 30 residential complexes, 8 commercial complexes, and 4 information technology parks covering a saleable area (KPDL share) of over 7.5 million square feet across Pune and Bengaluru. The Company is expanding in the high demand Bengaluru market, leveraging 19 years of presence in this market. The company has also recently forayed into the Mumbai market where the initial market entry focus will be on low risk society re-development projects. The Mumbai foray is a long term strategy for the Company which will facilitate margin expansion going forward and reduce its working capital cycle. Group Companies Name of the Subsidiary Companies Regenesis Project Management Company Private Limited Sylvan Acres Realty Private Limited Yashowardhan Promoters and Developers Private Limited Tuscan Real Estate Private Limited Regenesis Facility Management Company Private Limited Oakwoods Hospitality Private Limited Olive Realty Private Limited
Lilac Hospitality Private Limited Jasmine Hospitality Private Limited Bellflower Properties Private Limited Kolte-Patil Real Estate Private Limited Snowflower Properties Private Limited PNP Agrotech Pvt. Ltd. PNP Retail Private Limited Name of the Entity Corolla Realty Limited Kolte-Patil I-Ven Townships (Pune) Limited Ankit Enterprises Kolte-Patil Homes Associates, Partnership Firms and Joint Ventures Green Olive Ventures Vibhu KPDL Ventures KP-Rachana Real Estate LLP Sanjivani Integrated Township LLP
FINANCIAL HIGHLIGHTS (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions) Annual Profit & Loss Statement for the period of 2012 to 2015E Value (Rs. mn) FY12A FY13A FY14E FY15E Description 12m 12m 12m 12m Net Sales 2492.38 7274.80 6076.70 6988.20 Other Income 104.58 365.33 79.25 99.06 Total Income 2596.96 7640.13 6155.95 7087.26 Expenditure -1815.23-5354.24-4248.32-5031.51 Operating Profit 781.73 2285.89 1907.63 2055.76 Interest -240.83-363.49-361.49-433.78 Gross profit 540.90 1922.40 1546.14 1621.97 Depreciation -21.12-58.67-45.46-54.55 Exceptional Items -21.69 0.00 0.00 0.00 Profit Before Tax 498.09 1863.73 1500.69 1567.42 Tax -140.46-624.61-506.13-509.41 Profit After Tax 357.63 1239.12 994.56 1058.01 Minority Interest -16.78-164.71-296.30-355.55 Net Profit 340.85 1074.41 698.26 702.46 Equity capital 757.75 757.75 757.75 757.75 Reserves 6323.61 6414.57 7112.83 7815.29 Face value 10.00 10.00 10.00 10.00 EPS 4.50 14.18 9.21 9.27 Quarterly Profit & Loss Statement for the period of 30 th June 2013 to 31 st March, 2014E Value (Rs. mn) 30-Jun-13 30-Sep-13 31-Dec-13 31-Mar-14E Description 3m 3m 3m 3m Net Sales 2163.41 1886.19 1881.39 2031.90 Other income 30.89 52.60 19.19 29.17 Total Income 2194.30 1938.79 1900.58 2061.07 Expenditure -1527.38-1283.22-1308.77-1412.17 Operating profit 666.92 655.57 591.81 648.90 Interest -103.15-114.72-120.16-138.18 Gross profit 563.77 540.85 471.66 510.72 Depreciation -21.01-16.57-12.87-11.58 Profit Before Tax 542.76 524.28 458.79 499.14 Tax -180.97-168.92-157.95-167.21 Profit After Tax 361.79 355.36 300.84 331.93 Minority Interest -97.79-33.12-96.83-101.67 Net Profit 264.00 322.24 204.01 230.25 Equity capital 757.75 757.75 757.75 757.75 Face value 10.00 10.00 10.00 10.00 EPS 3.48 4.25 2.69 3.04
Ratio Analysis Particulars FY12A FY13A FY14E FY15E EPS (Rs.) 4.50 14.18 9.21 9.27 EBITDA Margin (%) 31.36% 31.42% 31.39% 29.42% PBT Margin (%) 19.98% 25.62% 24.70% 22.43% PAT Margin (%) 14.35% 17.03% 16.37% 15.14% P/E Ratio (x) 20.03 6.35 9.78 9.72 ROE (%) 5.05% 17.28% 12.64% 12.34% ROCE (%) 8.95% 26.91% 21.13% 21.46% EV/EBITDA (x) 10.56 3.17 3.47 2.98 Book Value (Rs.) 93.45 94.65 103.87 113.14 P/BV 0.96 0.95 0.87 0.80 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 90.10, the stock P/E ratio is at 9.78 x FY14E and 9.72 x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.9.21 and Rs.9.27 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 41% and 44% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 3.47 x for FY14E and 2.98 x for FY15E. Price to Book Value of the stock is expected to be at 0.87 x and 0.80 x respectively for FY14E and FY15E. We recommend BUY in this particular scrip with a target price of Rs.125.00 for Medium to Long term investment. INDUSTRY OVERVIEW Real estate in India continues to be a favoured destination globally for investors, developers and non-resident Indians (NRIs), driven largely by investor-friendly government policies and increasing globalisation. The second largest employment generation sector after agriculture, real estate contributes about 6.3 per cent to India s gross domestic product (GDP). The foreign direct investment (FDI) in the sector is expected to touch US$ 25 billion in the next 10 years from its current US$ 4 billion. The sector s progress is driven by factors such as rapid urbanisation, a growing trend towards nuclear families, positive demographics, rural urban migration, ever-developing infrastructure, higher income levels and housing demand. The real estate sector, with its growing investment opportunities, is expected to post annual revenues of US$ 180 billion by 2020. Market Dynamics The real estate sector in India is witnessing rapid growth in the residential, commercial and industrial segments. Real estate development, once restricted to bigger cities, have shown marked progress in smaller cities and towns owing to availability of banks loans, higher earnings and improved standard of living. The real estate sector of India is projected to post annual revenues of US$ 180 billion by 2020 against US$ 66.8 billion in 2010 11, a compound annual growth rate (CAGR) of 11.6 per cent. The demand is expected to grow at a CAGR of 19 per cent in the period 2010 2014, with Tier I metropolitan cities expected to account for about 40 per cent of this growth. As of now, Mumbai, Delhi-National Capital Region (NCR) and Bengaluru cater for 46 per
cent of total office space demand in India. This demand is expected to be rise sharply in Tier II cities such as Kolkata and Chennai in the period 2010 14. Today, Delhi-NCR accounts for about 30 per cent of the total mall supply in India. About 53 per cent of demand for total mall space is projected to come from the country s top seven cities, namely Delhi-NCR, Bengaluru, Mumbai, Kolkata, Pune, Hyderabad, and Chennai, in the period 2010 2014. Investment Opportunities The Indian retail realty sector is projected to grow at around 15 per cent year-on-year over the next 3 5 years as against a 12 13 per cent nominal growth of India s GDP estimated by the International Monetary Fund (IMF). If the sector does indeed manage the aforementioned growth, it will touch Rs 34 trillion (US$ 544.73 billion) by 2016. The construction development sector, including townships, housing and built-up infrastructure garnered total FDI worth US$ 22,671.95 million in the period April 2000 August 2013. Construction (infrastructure) activities during the period received FDI worth US$ 2,280.95 million, according to the Department of Industrial Policy and Promotion (DIPP). The following are some of the major investments in the Indian real estate sector: Godrej Properties Ltd plans to invest Rs 9,000 crore (US$ 1.44 billion) in 15 new real estate projects in India over the next 10 years. Unitech Ltd has signed a Rs 800 crore (US$ 128.17 million) deal to lease an 800,000 sq ft space at one of its IT Special Economic Zones (SEZ) in Gurgaon, to multinational human resource firm, Aon Hewitt. NRI billionaire Mr Ravi Pillai plans to purchase stake worth about US$ 100 in a special purpose vehicle floated by Pune-based realtor, Panchshil Realty. The investment will go into the construction of Trump Towers and World Trade Centre in Pune, Maharashtra. French luxury hotel chain Sofitel, which is managed by Accor Group, is targeting 10 properties in India, mainly in major luxury destinations, in the next few years. Infrastructure Leasing & Financial Services (IL&FS) Ltd has claimed a project worth Rs 244.46 crore (US$ 39.17 million) from realty firm Emaar MGF for construction work at the latter s residential project at Gurgaon, Haryana. One of the world s top manufacturers of elevators, US-based Otis, is setting its sights on the Indian real estate market. The pace of construction in India makes the country an attractive proposition for such an investment. The company will be working with the Delhi and Hyderabad Metro projects. The former has placed an order for 222 escalators for its Phase III project, according to Otis.
Government Initiatives According to the existing FDI policy, 100 per cent FDI in the construction development sector is permitted through the automatic route. DIPP is looking at relaxing FDI norms further to encourage investment. It has also proposed a reduction in the minimum capitalisation for wholly-owned subsidiaries from US$ 10 million to US$ 5 million, and from US$ 5 million to US$ 2.5 million for joint ventures with Indian partners. One of the major initiatives of the Ministry of Housing and Urban Poverty Alleviation (MHUPA) is to provide affordable housing for poor people living in urban areas. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is one its flagship schemes, a reform driven investment programme which started with the objective of creating economically productive, efficient, responsive and inclusive cities. The Real Estate (Regulation and Development) Bill, 2013, as approved by the Union Cabinet is a pioneering initiative aimed at delivering a uniform regulatory environment to protect the consumer, help in quick verdicts of disputes and ensure systematic growth of the sector. Road Ahead Demand for space from sectors such as education and healthcare has opened up opportunities in the real estate sector. Also, growth in the number of tourists has led to demand for service apartments. This demand in the tourism sector is expected to generate 50,000 new hotel rooms over the next four to five years, across India s major cities. 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.
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