Unitech (UT)
Property
Financials disappoint though sales remain healthy and debt declines. Unitech’s
reported revenues and EBITDA are down 3% and 45% yoy while sales and launches
remained steady qoq at 1.8 mn sq. ft and 2.8 mn sq. ft, respectively. Gross debt has
declined for four quarters in a row now which is a key positive. We keep our rating and
target price suspended as the stock is likely trading based on news flow beyond
fundamentals until issues related to the telecom business and share pledges are
resolved. We highlight that UT trades at its previous cycle low adjusted for equity
issuances and our stress-case valuation is Rs47/share.
Yoy decline continues
Unitech reported revenues of Rs6.3 bn (+5% qoq, -3% yoy) and EBITDA of Rs1.4 bn (+15% qoq, -
45% yoy) as EBITDA margin increased by only 2% qoq to 22.1% which is the third lowest since
1QFY07. The last three quarters have yielded EBITDA margins in the bottom three since 1QFY07
which is a cause for concern. Real estate, construction and other expenditure as a proportion of
sales was 68% in 2QFY12 versus 75% in 1QFY12 and 57% in 2QFY11. PAT came in at Rs925 mn
(-6% qoq, -47% yoy) as lower-than-expected other income led to a disappointment in expectation
of 34%. Effective tax rate of 31.4% was stable qoq and as per our expectation.
Sales remain steady while launches too remain healthy
Unitech launched 2.8 mn sq. ft in 2QFY12 versus 3.2 mn sq. ft in 1QFY12 with Gurgaon, Noida
and Greater Noida accounting for 1.8 mn sq. ft. Sales remained steady qoq at 1.8 mn sq. ft (1.6
mn sq. ft in residential and 0.2 mn sq. ft in non-residential ) with Gurgaon seeing the maximum
sales at 0.9 mn sq. ft. At present, Unitech has total of 44.5 mn sq. ft of projects of which 19 mn
sq. ft (3 projects) are in the handover stage.
We keep our rating suspended on Unitech’s stock
We believe the stock is trading on news and events beyond fundamentals and keep our rating
suspended on Unitech. We highlight that our stress-case NAV is Rs47/share assuming (1) zero
value of the telecom business, (2) increasing WACC to 18% and (3) increasing interest cost by 200
bps. We see two factors which could override fundamentals – (1) the ongoing Central Bureau of
Investigation (CBI) inquiry into 2G spectrum allocations, (2) news flow related to share pledges by
UT promoters to over 72% of their shareholding.
Property
Financials disappoint though sales remain healthy and debt declines. Unitech’s
reported revenues and EBITDA are down 3% and 45% yoy while sales and launches
remained steady qoq at 1.8 mn sq. ft and 2.8 mn sq. ft, respectively. Gross debt has
declined for four quarters in a row now which is a key positive. We keep our rating and
target price suspended as the stock is likely trading based on news flow beyond
fundamentals until issues related to the telecom business and share pledges are
resolved. We highlight that UT trades at its previous cycle low adjusted for equity
issuances and our stress-case valuation is Rs47/share.
Yoy decline continues
Unitech reported revenues of Rs6.3 bn (+5% qoq, -3% yoy) and EBITDA of Rs1.4 bn (+15% qoq, -
45% yoy) as EBITDA margin increased by only 2% qoq to 22.1% which is the third lowest since
1QFY07. The last three quarters have yielded EBITDA margins in the bottom three since 1QFY07
which is a cause for concern. Real estate, construction and other expenditure as a proportion of
sales was 68% in 2QFY12 versus 75% in 1QFY12 and 57% in 2QFY11. PAT came in at Rs925 mn
(-6% qoq, -47% yoy) as lower-than-expected other income led to a disappointment in expectation
of 34%. Effective tax rate of 31.4% was stable qoq and as per our expectation.
Sales remain steady while launches too remain healthy
Unitech launched 2.8 mn sq. ft in 2QFY12 versus 3.2 mn sq. ft in 1QFY12 with Gurgaon, Noida
and Greater Noida accounting for 1.8 mn sq. ft. Sales remained steady qoq at 1.8 mn sq. ft (1.6
mn sq. ft in residential and 0.2 mn sq. ft in non-residential ) with Gurgaon seeing the maximum
sales at 0.9 mn sq. ft. At present, Unitech has total of 44.5 mn sq. ft of projects of which 19 mn
sq. ft (3 projects) are in the handover stage.
We keep our rating suspended on Unitech’s stock
We believe the stock is trading on news and events beyond fundamentals and keep our rating
suspended on Unitech. We highlight that our stress-case NAV is Rs47/share assuming (1) zero
value of the telecom business, (2) increasing WACC to 18% and (3) increasing interest cost by 200
bps. We see two factors which could override fundamentals – (1) the ongoing Central Bureau of
Investigation (CBI) inquiry into 2G spectrum allocations, (2) news flow related to share pledges by
UT promoters to over 72% of their shareholding.
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