Analyst Corner: Sunteck Realty: Maintain ‘Buy’ with a TP of Rs 487

ICICI Securities
Analyst Corner, Sunteck Realty, SRIN, ICICI Securities, SRIN, Mumbai, The Avenue 4, ODC, Goregaon, Naigaon, Maxx World, Andheri West

After clocking muted H1FY20 sales bookings of just Rs 2.9 bn, Sunteck Realty's (SRIN) sales bookings have significantly picked up in H2FY20 with Rs 8.1 bn of sales across two new project launches in Mumbai.

The Avenue 4 residential project in ODC, Goregaon achieved sales bookings of Rs 2.1 bn while the recently launched Naigaon Phase 2 (Maxx World) has clocked sales bookings worth Rs 6.0 bn. With this, SRIN has achieved Rs 12 bn of sales bookings in YTDFY20 (similar levels to FY19), which should result in improved collections going ahead.

Also, SRIN expects to commence construction of its annuity assets of 3msf at ODC, Goregaon in Q1FY21 as well in a phased manner. We maintain our ‘Buy’ rating with an unchanged target price of Rs 487/share based on 1x NAV. SRIN launched two towers at its 4th Avenue, ODC project in Goregaon, Mumbai in Q3FY20 spread over 0.9msf (over 200 units launched) of which it sold over 50% of the launched inventory (123 units sold worth Rs 2.1 bn). Further, in February 2020, SRIN also launched Maxx World, the second phase of its affordable housing project in Naigaon in Mumbai's extended Western suburbs having ~2,000 units.

SRIN has sold ~80% of the launched inventory in Maxx World (1,600 units worth Rs 6.0 bn). With these two successful back-to-back launches in H2FY20, SRIN has now achieved Rs 12 bn of sales in YTDFY20 (similar levels to FY19) and this should reflect in improved collections from FY21E as execution ramps up across these projects.

SRIN's new project acquisition is located in Andheri West at a relatively premium location in Mumbai's Western suburbs. Current resale prices for completed projects range between Rs 30,000-35,000/psf. As per SRIN, most of the approvals for launch of the freesale area are already in place and the only cost to be borne by SRIN is for construction and excludes cost of project approvals and FSI purchase.

We have assumed a launch in Q1FY21 and development over FY21-27E (this could be monetised faster depending on pace of sales) with a conservative launch price assumption of Rs 22,000/psf and construction cost of Rs 5,000/psf.