Mantra for Sunteck Realty investors: wait and watch

On the business development front, the company continues to aggressively scout for opportunities in the Mumbai Metropolitan Region. It aims to double its gross development value (GDV) to  ₹60,000 crore in the coming three years. (Sameer Joshi/Mint)
On the business development front, the company continues to aggressively scout for opportunities in the Mumbai Metropolitan Region. It aims to double its gross development value (GDV) to 60,000 crore in the coming three years. (Sameer Joshi/Mint)

Summary

Sunteck’s March quarter (Q4FY24) performance will decide if it is able to meet FY24 pre-sales or bookings guidance of 2,000 crore. In the first nine months of FY24, it clocked 1,237 crore pre-sales.

After a 35% up move in 2023, the momentum in Sunteck Realty Ltd stock has cooled off. Shares of the Mumbai-based real estate developer have gained a mere 3% so far in 2024. Investors seem to be in a wait-and-watch mode.

Sunteck’s March quarter (Q4FY24) performance will decide if it is able to meet FY24 pre-sales or bookings guidance of 2,000 crore. In the first nine months of FY24, it clocked 1,237 crore pre-sales.

The current quarter will see the launch of a third tower at its Mira Road project and new phase in the Naigaon project. Sales sustenance at its ultra-luxury Bandra Kurla Complex and mid-income Kalyan project is also expected to generate higher pre-sales traction in Q4.

Recall that a sore point in Q3FY24 earnings were weak revenue recognition and unimpressive collections. Adjusted for the sale of treasury stock, collections at 160 crore slid to a 13-quarter low in Q3FY24, pointed out analysts at Jefferis India.

The management expects collections to improve over the next two-four quarters, but the quantum of improvement hinges on demand momentum in ongoing projects.

“The company’s key projects such as Naigaon and Oshiwara District Centre are set for phase-wise completion over FY24-26E. The P&L is expected to improve beginning Q4FY24 with the delivery of the Maxx World project, which would contribute 750-800 crore to the topline," said Motilal Oswal Financial Services’ analysts in a report dated 22 February.

In its annuity portfolio, both the assets Sunteck Icon and Sunteck BKC 51 are fully completed, out of which one is leased out and another will be leased out in Q4.

On the business development front, the company continues to aggressively scout for opportunities in the Mumbai Metropolitan Region. It aims to double its gross development value (GDV) to 60,000 crore in the coming three years.

Adoption of the asset-light model has helped to keep its balance sheet in a comfortable position with lower leverage, amid new project additions. That said, the timely launch of its Nepean Sea Road Project slated in FY25, with a potential GDV of 2,500 crore would be a key stock trigger.

Meanwhile, Sunteck is exploring some opportunities in the middle-income/affordable housing segment along with a global development institution IFC.

The affordable segment took a beating post the covid-19 pandemic as the purchasing power of potential buyers got severely impacted and home loan rates soared. A new government-backed incentive scheme was expected to be announced to revive the segment, but so far, there is no clarity. This is a dampener given Sunteck's relatively higher exposure to this segment.

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