Parsvnath Developers (PDL) has reported a 32% y-o-y rise in net sales to Rs5.3 billion for Q4FY08. This was 25% below our estimate mainly on account of a slowdown in execution of existing projects (revenues booked on percentage completion basis).
The company has booked sales of slightly above 4mn sq ft in Q4FY08 with 3.6mn sq ft booked in the third quarter.
The EBITDA margin for the quarter has fallen significantly to 33.8% as against 37.9% in Q4FY07. This was due to the twin factors of spiralling commodity prices (steel and cement), which increased the construction cost by Rs 200–250/sq ft, and a softening in property rates.
The PAT margin has also climbed down to 20.6% in Q4FY08 versus the average margin of 24% for FY08 on account of rising interest and depreciation costs. We expect the net margin to witness further pressure with a tightening monetary policy.
At the current price of Rs142, PDL discounts our FY09E and FY10E EPS of Rs29.5 and Rs43 by 4.8x and 3.3x respectively.
We have downgraded our target price to Rs245 from Rs409 on account of the slowdown in execution, rising interest costs, increasing commodity prices and uncertainty dogging the realty market.