HDIL’s 1QFY10 revenue fell 48% y-o-y to Rs2.9b and PAT slipped 66% y-o-y to Rs1.1 billion.
EBITDA margins were down 42pp to 39.3% from 81.7% a year earlier. In 1QFY10 HDIL capitalized Rs1.3 billion or 89% of its interest expenditure of Rs1.5 billion. Effective tax rate was 11.6% v/s 5.7% during 1QFY09.
HDIL recapitalized its balance sheet by rescheduling its debt repayment obligations and raising fresh equity through the QIP route and a promoter-warrant issue. After the QIP HDIL’s gross debt has reduced to Rs29.4 billion from Rs43.4 billion in 1QFY10 and cash on hand stood at Rs1.5 billion.
Phase 1 of the MIAL project is on schedule and the management is confident of meeting its guidance of giving possession of units by 3QFY10 as over 50% of the work was complete in May 2009.
The company is likely to generate 6 to 7msf of TDRs in FY10 from the phase I of the MIAL project. HDIL has tied up with a partner for land for rehabilitation for phases II and III of the MIAL project and the management estimates the outstanding land cost for the MIAL project to be about Rs6b.
Hence, there is unlikely to be a major capex requirement for land for the remaining phases of MIAL projects.
HDIL is well placed to benefit from a recovery in Mumbai’s real-estate market (87% of HDIL’s land-bank is in the MMR).
In the backdrop of a spurt in TDR realizations, we have raised our TDR rate assumption for the MIAL project to Rs1,600/sf v/s Rs1,400/sf earlier.
The stock trades at P/B of 1.3x FY11E adjusted BV of Rs202. Our revised NAV is Rs325/sh v/s Rs311/sh earlier.
We have valued the MIAL project at Rs40b or Rs115/sh (33% of GAV). Our revised target price for HDIL is Rs292/share (10% discount to NAV). Maintain BUY recommendation.