Revenues declined to Rs554 million (-18% q-o-q; -57% y-o-y) reflecting continued weakness in the property market due to slowdown in the IT/ITES sector. Most of Puravankara projects are located in the IT/ITES-centric cities.
EBITDA margin has remained stable at 18% q-o-q but has declined from 38% in 1Q FY09. The net profit (at Rs102mn) decline by 30% q-o-q and 77% y-o-y was partially mitigated by the low tax rate of 1%.
Net debt to equity ratio remained at 0.58. While debtors have risen QoQ by Rs98mn primarily due to rise in long term debtors, our analysis of debtor days (in terms of annualized sales) indicates that debtor days has peaked. We expect debtor days to trend downward, as sales volumes increase in the next one year.
Provident (100% owned subsidiary of Puravankara) has met with strong success in the recent two launches — one each in Chennai (launched 2.2mn sq ft) and Bangalore (3.46mn sq ft), in the affordable housing segment.
The company has said that any further land for affordable housing will be purchased by Provident and Puravankara’s current land bank is not expected to be used for this purpose.
The demand has primarily come from the government/semi government sector, which has not been impacted by the current economic slowdown. However, margins are expected to be at around 15-20%.
We derive comfort in upgrade to BUY due to: 1) conservative price assumptions 2) healthy balance sheet.
We upgrade our target price by shifting the base year from FY10 to FY11. The stock is currently trading at Rs96, implying upside of 15%. For every 1% change in the sale price, the NAV increases by 7%.
We are therefore upgrading our recommendation to BUY with a target price of Rs110 implying 15% upside.