Prestige Estates Projects Ltd
NSE:PRESTIGE
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
952.6
2 056.8
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Prestige Estates Projects Ltd
Earnings Call Analysis
Q2-2024 Analysis
Prestige Estates Projects Ltd
The narrative of Prestige Real Estate's fiscal Q2 performance unfolds with robust sales, signifying an exceptional market response. The company's sales soared to over INR 7,000 crores, with collections at INR 2,600 crores. Notably, they sold 6.82 million square feet, a stellar increase of 50%, equating to 3,659 units or about 40 units per day. This milestone is further highlighted by the record average realization per square foot of INR 10,369.
In the first half of the fiscal year, Prestige has been on an upward trajectory with sales reaching INR 11,077 crores. The growth momentum is reflected even more when compared to the full-year revenue of FY '23, which stood at INR 13,000 crores—a figure almost met in just half of the current year. The company has launched 16.1 million square feet of new properties, primarily residential, which contributed to the lucrative H1 revenue of INR 5,222 crores.
With a keen strategic approach, Prestige is expanding its influence beyond its Bangalore stronghold. New launches include numerous ventures in Hyderabad and Noida, broadening the company's market reach. This geographical expansion is expected to further enhance their sales and by the end of the fiscal year, Prestige anticipates total unrecognized revenues potentially exceeding INR 20,000 crores, boding well for future profitability.
Continuing the upward trend, Prestige expects collectables to jump from INR 10,000 crores last year to around INR 12,000 crores this year. A testament to the company's confidence in its operational capabilities and customer satisfaction, also suggesting a promising enhancement in future cash flows.
As Prestige scales up its operations, including a significant leap in presales, they are aligning their business with increased manpower and technology investments to maintain high-quality delivery standards. Moreover, solidified partnerships with key contractors ensure the necessary bandwidth for execution, indicating Prestige's readiness for the increasing demand in real estate construction.
Wrapping up the earnings call, executives of Prestige Real Estate demonstrated a cautious yet optimistic outlook for the future. With ongoing projects and potential launches in Bangalore, Noida, and other regions, the company is gearing up for a continued trajectory of growth. Furthermore, the leadership's confidence in managing debt appropriately and generating cash flows from residential sales to fund commercial projects reinforces their strategic financial management.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Prestige Estate Project Limited Q2 FY '24 Investor Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Samar Sarda. Thank you, and over to you, sir.
Thanks, Akshay, and welcome, everybody. As always, we have the senior management from Prestige Estate Project. Mr. Irfan Razack, the Chairman and Managing Director; Mr. Venkat Narayana; and Amit Mor, CFO. Before I hand over the call to the management for the initial comments, let me congratulate the entire team of Prestige for a good H1 FY '24 and achieving more than INR 111 billion of presales. With this good note, over to the management for their initial comments.
Venkat will give the opening remarks.
Good afternoon, everyone. Thank you for joining the post-result conference call of Prestige Real Estate. Thanks [indiscernible] quickly let me take you through the operational highlights for the quarter. We had one of the best quarters this fiscal Q2. The overall sales for the quarter was over INR 7,000 crores. Collections are at INR 2,600 crores, and we sold 6.82 million square foot of area, up by 50%. Overall, we sold 3,659 units, that's almost 40 units a day. And with the highest average realization per square foot of [ INR 10,369 ] square foot.
With this, our H1 sales are at [ over ] INR 11,000 crores -- INR 11,077 crores. If you look at overall FY '23, we have [ INR 13,000 crores ]. So in the half of -- first half of the year, we come closer [indiscernible] in the full year last year. Collections are at [ 5,364 ]. We sold close to 10.5 million square foot of area and 5,935 units average [ relations ] again over INR 10,000 square foot. We had launched during this fiscal, mainly all -- almost all everything that we have launched is in the residential projects. H1 [ was ] [ 16.1 million ] square foot of launches overall. Majority of them are being in Q2, which is power grow, Prestige [indiscernible] shows and 2 projects in Hyderabad. In the beginning of this fiscal, we had launched the Prestige [indiscernible]I would like to place on record that all the projects that we have launched have received exceptional response. And therefore, helping us to clock the numbers.
In terms of completion, first half of this year, we have completed 8.11 million square foot of area, residentially is 7 million, commercial projects around 1.2 million. In terms of financial performance, overall, for the first half of the year, we have clocked total revenue of INR 5,222 crores. As you know, the revenue recognition is on a completed basis. This directly links to what projects get completed in next quarter. And also if there is any completed inventory that gets sold during the quarter. EBITDA of [ 2,424 ] in with a PAT of [ 1,227 ] We did have an exceptional item during this quarter that contributed to the income by virtue of consolidating our [ fee ] in the Prestige [indiscernible] and Prestige -- of the project [indiscernible] The Prestige what we call it as. There are some gains in terms of accounting. Therefore, that is treated as an exceptional item for the quarter.
Moving ahead, we have a robust pipeline of launches -- couple of projects in Bombay in terms of Prestige ocean out at marine lines. And Prestige [ not list ] that [ hourly ]. We have Prestige [ Palawa gardens ] [indiscernible] launch. We are launching one of the biggest projects in Hyderabad in the form of Prestige City, Hyderabad, tomorrow. And we also have other development plants in Hyderabad in the form of [indiscernible] So we have a robust pipeline for launches for the rest half of this year as well. And we look forward to continued response from the customers.
Overall, if you look at it in terms of construction spend in addition to the operational financial highlights that we have mentioned, we spent on construction INR 1,726 crores this quarter. Overall, first half of the year, we have spent INR 3,500 crores of money on construction, in that INR 2,400 crores is for residential and the remaining split between commercial, retail and hospitality projects. During the quarter, we also had a high amount of spend on land acquisitions, close to INR 847 crores overall. In that major acquisition is the land that we had bid and acquired in Hyderabad, at [ Badwill ], INR 600 crores. and some other payments that we have made for the land in Goa and one in Delhi and Prestige Falcon City, the next phase of the development. With this brief, we would like to open the quorum for question and answer please.
[Operator Instructions] The first question is from the line of Puneet Gulati from HSBC.
Congratulations on great presales here. My first question is with respect to the residential debt, which is INR 5,000 crores odd. Can you comment upon what does this debt really relate to? And then how do you see the trajectory of this debt, given that you're recording such starting sales and collections as well? How should one see this moving in a year down the line?
The point that you mentioned is valid, debt that has gone up. But with the kind of opportunities that are available and the traction that we have for our launches. We need to increase our portfolio of upcoming projects as well as the -- securing the land bank. It does take 6 months to 1 year to get ready this land and make them into projects and get ready for the launches. Therefore, a substantial amount of investments have been made into the acquisitions. If you look at our upcoming residential portfolio, it is almost around 63 million square foot spread across 24 projects. Point here to note is that price and scale of each project also has gone up significantly. Across 5, 6 projects, we made a lot of investments. And once we launch, we'll be able to get back that money and we'll be able to churn that capital and acquired in the -- land for the next phase of launches.
What is important is because we are moving from operating at INR 5,000 crores of resales to INR 15,000 crores of presale number, the land bank that we need to have has significantly gone up. So this is a transition pace. Therefore, you would see a lot of deployment in terms of capital towards land and although [indiscernible] increase in the cost of debt because most of the borrowing that has been made is made for the acquisitions. Between Prestige [indiscernible] in Mumbai, Prestige Ocean Towers Mumbai and Prestige City Hyderabad, Prestige recently acquired [ Badwel ], and [ Raintree ] boulevard and county with 6, 7 projects would have deployed close to INR 4,200-odd crores of capital. And happy to share that except for the Badwel, almost all the projects are in different stages of approval. As and when we launch, we'll be able to get back this capital, either we pay debt with that money or [indiscernible] recycling and more acquisitions.
Okay. Understood. That's very clear sir. How much of [indiscernible] is towards land and how much would be just working capital [indiscernible] projects?
No. As I told only towards these 6 projects on [ INR 11,420 crores ]
And the working capital,
Land. Only land.
Okay. So that's [indiscernible] Understood. And do you see a trajectory for it to go down? Or you think since you're on a massive growth speed, it might go up along with your thesis number?
Two aspects to note. One is we need to constantly have a land bank. Once we launch with project to get back money if you are able to get the same traction, ideally, we should deploy towards further acquisitions so that we can maintain the momentum of sales currently that we have. Second is we also have got a little over INR 20,000 crores of [indiscernible] revenue. As and when these projects get [indiscernible] recognition, debt equity would fall because these are the projects under construction and not yet come for revenue recognition, whereas that is absolute number.
Understood. Secondly, if you can also share the number of debt, which is outside the balance sheet? What should that number be?
So we are close to INR 2,200 crores in JV majorly comprising in lake shore drive close to INR 400 crores [indiscernible] [ INR 1,350 crores ] [indiscernible] [ INR 250 crores ] and [ Thompson ] INR 300 crores.
Thompson is a mall in -- [indiscernible] Thompson, which we just inaugurated last quarter, and now it's running. That's one of the important milestones for the last quarter. We had a JV partner there. So therefore, it's not coming for consolidation. Likewise, the Prestige Tech Park IV and the Prestige Lakeshore drive in both the projects, we have a Blackstone as a partner. In these 2 projects put together, there is a INR 650-odd crores of debt, again [indiscernible] consolidation. Likewise, the [ Aero ] cities, the hotel that we are building, which is large, we have a JV partner, and whatever the debt that we have INR 1,000-plus crores in our current [indiscernible] for consumption, overall around [ INR 2,000 crores ]
And that's your share of the total JV share.
[indiscernible]
Our share would be half of it [ INR 1,150 crores ].
That's very clear. And just lastly, if I may, any progress you can talk about on your potential launch in Noida or any other new markets that you're now exploring?
Primarily, the market that we are looking at now which were not present in terms of residential projects, although we are doing the hotel and office is NCR region. As you know, we had signed already in Noida [indiscernible] and we have designed the project we have marketing office Prestige [indiscernible] gardens. And because there are some issues with the allotment process to the elsewhere developer. The sanctions are getting [indiscernible] delayed. So it's a 2.2 million square foot of projects. Now that there is a committee that is set up to look into the [ country up ] approval. We are hoping that we should be able to launch that in Q4 of this year. And in addition to that, in [ Gurgaon ], we have seen a couple of land passes that are in a diligent stage. We have right now confidential [indiscernible] therefore, not in a position to give much of details. By the time next quarter conference call comes, we'll definitely have 2, 3 to more projects in pipeline between Delhi and [ Gurgao ].
[Operator Instructions] The next question is from the line of Pritesh Sheth from Motiwal Oswal.
Congrats on a very strong first half. First is on Bangalore while probably in first half, we would have already clocked INR 8,000 crores to INR 9,000 crores of presales. What is going to be the strategy in second half because most of the launches that you highlighted are in rest of -- I mean, non-Bangalore markets and considering we have already reached the scale there, would we constrained ourselves in terms of launching any major projects in Bangalore for second half and focus on nonbank loan markets? And early launch more projecting FY '25? Or how is the strategy doing.
Now we have several projects in all the cities that we are operating in, including right now, which are now getting ready for launch. Yes, the observation that Bangalore has given the maximum in the first half, which, of course, we are Bangalore-centric. So obviously, will be very strong in right now. Having said that, now, just tomorrow, we have a huge launch in Hyderabad, which is a 10 million square feet project, which is called the Prestige city Hyderabad which again the traction has been good. We just got the [ RERA ], I think we'll be opening that for sale on tomorrow onwards. So the results will be seen in the in this current quarter.
Similarly, we've got like Venkat already mentioned in his opening remarks, we've got the Ocean Tower in Mumbai. That also is a waiting for the [ RERA ] number. Hopefully, we should get that in the next week or so. And also, we have got a big approval for ending in Chennai. Apart from that, we have Goa and like you also talked about the NCR, yes, there's 1 still bond project in NCR, where we are hoping the approvals will come. And in Bangalore, of course, there are several projects that are there. including there is a big development, which, of course, that will happen in the last quarter of the year, which is the Raintree Park. So there's plenty of things happening. And yes, I can't launch a huge project like how we did in Bangalore, the Park [ grow ] every quarter. There will be some thing. But what we have done all our math and we are very confident to see that we reached the [ 20k ], which we guided. And that will come from different cities, different sources, and I don't see any anxiety in that. Of course, we will not I don't think -- I don't know yet see. We did INR 7,000 crores in this quarter, whether we equal that or we fall short of it is there. But overall, INR 9,000 crores in the next 2 quarters is what we have planned for which will [indiscernible] happen.
Sure. Got it, clear. And larger projects like Seven Star, [ Raintree Park ] you already mentioned and Falcon City Phase 2 would be next year launch, right. I mean the...
Raintree park will happen in the last quarter, but the Southern Star and other things will definitely happen in the following year. It won't happen this year. also the Falcon City Phase 2. These are all under planning and approval, which will take its own time. But we are pretty confident that whatever we have in the other cities, the other cities definitely will chip in and give us the necessary numbers.
Got it. Got it. And just wanted to understand your strategy about fast growth considering we launched that whole project altogether. Given a very strong demand and pricing environment, why not choose to launch it phase by phase and get that pricing traction as well. So what was your thoughts behind that?
See, we've got required pricing. Of course, we have some inventory still in part growth. Having said that, I believe when there is momentum and there is interest and there is demand, we should definitely try and see that we cash in on that demand. And now we've also awarded the contract to LNP, the entire contract is finalized for the civil work. and they are also going to build this in one single phase. It's how -- it's an outlook. It depends like the [indiscernible] city in [indiscernible] we thought that building it over 10, 12 years. But one thing we have a good we said, why not do the whole thing and just this [indiscernible] I was there. We are going to complete that almost at the same time, about 7,000 flats. So then that gives the team that much courage. The customer gets the courage that yes, perceived launch this and now are delivering it in time or maybe before time. And we move on because that also frees up the space for us to do more. I mean, again, if you try to face the entire process, that the entire site becomes a construction site all the time, every time will be labor movement, logistics, there's a lot of human interaction that goes on customer dissatisfaction. This way, you can show the whole picture and complete it and then hindsight. I mean we believe in just taking up things, control and go on. Like even in Mumbai, we're doing the prestige city in [ Malone ] we are doing the entire balance all at one time and see us we did the topping up last week in Mumbai, we had a topping up certainly rent 55 floors has been completed. It's now only finishing. Now there's one more component in the Prestige City model, which is the Forest Hills, which will be launched either in the first -- last quarter or the first quarter next year.
[indiscernible] An outlook there's more [indiscernible] there's a holding cost, there's an interest cost and the market can change. So when the things are happening, why not do it?
Absolutely, I agree. Just last question on collections. So the efficiency of collections to sales issue has dropped down to 50%. Obviously, it's understandable given the sudden scale up. But the second half, what's your outlook on collections this INR 5,500-odd crores can go up to INR 12,000 cores, INR 13,000 crores in second -- I mean, overall, for full year, it can go to INR 12,000 crores, INR 13,000 crores or it would be...
It easily should go to around INR 12,000 crores. And last year, we did INR 10,000 crores. And this year, it should easily go up to INR 12,000 crores. It's again, a form of a function of sales, getting the agreements done. And I'm happy to say that [indiscernible] growth we launched, we sold but they had an agreement males in this 3 days' time, my people were able to issue of 1,000 agreements. So that's the type of scale up we have. There's no lack of sort of focus on this. And customers came very happy, but the agreement signed handed over. So we preempt all this. So there is a sort of a huge traction on this just not the booking or the next step and to the next step.
[Operator Instructions] The next question is from the line of [ Kushagra ] from Old Bridge Asset Management.
And congrats on the solid numbers. Just a few questions. One, on your debt side. So if I remember on your Investor Day, you sort of mentioned that residential cash flows we take care of significant part of commercial CapEx to some extent, yes. But it looks like that a lot of cash is getting deployed back or growing higher in the residential because you're setting new benchmarks every year, right? So to fund that INR 3,000 crores every year for commercial CapEx, you need or you have to rely on external debt -- just trying to get a sense on -- like do you think there will be higher net intake versus what you thought initially because your residential business is growing very well and investments are required in that. And do you still sort of stick to that INR 11,500 crores of net debt at peak levels or you will see some upside tackles over the medium term?
Still maintain that for residential business, we really do not require that it's only a temporary fair where we'll have to -- there's an opportunity to buy some land we have to buy the land and then turn that into a project, and we've been doing that successfully at top speed like when Venkat really said that the only project that we have not churned so far, which will take at least 6 to 8 months of the [indiscernible] land, which we bought recently, which is [ INR 600 crores ]. But the rest of it there is a churn, the money is there's a huge amount of cash that has gone in, which will come back. Where I need that is only for my CapEx, which is office, retail as well as hospitality. And I still say this time and again that residential business, you have no need or necessity to have debt. Unless, of course, again, you are using that cash flow for buying something else. But there have to be some hard stop. And I believe that we've actually scaled ourselves quite big. And of course, there's a lot of money that has gone into Mumbai also, which at some point of time will be turned back.
Sure. No, what I meant was residential, I totally understand you go the index, but there is a INR 15,000 crores of investments which we made in commercial.
[indiscernible] It's very muted.
Is this better?
Yes, please go ahead.
So basically, what I was trying to understand is residential does not need that I totally understand. What I meant was because your residential need investments to sort of maintain the benchmarks, the commercial CapEx, which to the tune of INR 15,000 crores spread out over 4 or 5 years, that may need some amount of debt. So what you -- I mean, you initially guided that residential will take care of commercial CapEx also. But now do you think the debt intake will be much higher versus what you anticipated. That was my question, actually.
No, I think residential surpluses will definitely take care partly for the commercial and the others. We have to fund that. I mean, there has to be a mix of equity and debt even for that. So I don't see any problem there. In fact, we're getting a lot of positive cash flows from all sides. And with type of launches that are happening and the success that is coming in the launches, we have to be cash positive, not cash negative.
Got it. Sure. That's helpful. The second question is some questions on your project. So -- if you can give some color how much of Mulund out of the total launch do you have sold or yet to be sold now and similar numbers for [indiscernible] as well?
Yes. I mean, see, Mulund is like 75% to 80% sold what we've launched. And -- just is just 1 single project. Everything we've launched. Of course, some floors we still have to get the fee. So close would -- but then out of a total number of units, we've actually sold more than 50%.
And last is just on your clarification on your Bangalore project launches. So you said because you had a very heavy first half in Mangalore, the launches may not be as deep in second half. But just wanted to understand in the presentation, you have mentioned FY '24 against all the upcoming Bangalore projects. Just trying to get a sense what exactly do you mean by that? And we already have the launches for that 26 million square feet is going to happen when.
Yes. Now the upcoming [indiscernible] today. Then we have [indiscernible] which is almost approved, then we've got the other one that will come in FY '24 is Raintree park, Pine forest. [indiscernible] and these will definitely come and [ cam ] them. These -- and Kings County and the Sunset Park all will come in FY '24. What will not come in FY '24 is Southern Star, [indiscernible] the Falcon City Phase 2 and the Green Mall. This will come in FY '25. So that's [indiscernible] even a total of projects that are upcoming. But out of this half of them will come in FY '24 and half of them in FY '25. Like if you look at the Southern Star, it's a fairly large project, it's 7.7 million square feet, and it's really but they have written '24, but actually, it should go to '25.
The next question is from the line of Kunal Lakhan from CLSA.
My first question is on -- as an organization, how we have scaled up in terms of like manpower or technology. So considering like a few years back, we were clocking probably 1/3 of what we are clocking today on an annualized basis in terms of presales. So I just wanted to understand how we have aligned our business and in terms of managing this scale?
So it's a dynamic thing. It will keep changing. 100% as and when there is a need we keep scaling up on manpower and everything else. And I believe that it's only everything will fall in place. This shouldn't be any problem. We have enough people -- we have people who have been here with the company for quite a long time. And we also do get new competencies. So it's a good mix and younger and older mix also helps.
Sure. A related question on that would be, let's say, if you look at -- including after at least 3 other guys who are clocking more than INR 14,000 crores, INR 14,000 crores of presales on an annual basis. So industry as a whole has also scaled up. So do you see any challenges on the execution side? Or predominantly on the contractual side, not enough contractual bandwidth to manage the scale. How do you see that?
No, no, that's an excellent question. Obviously, when we sell something, we also need somebody to produce it, build it for us. Fortunately, we've got some good relationships with some big contractors contracting companies and they are more than happy to do work for us. So it's like a lot of things are -- it's like a partnership that happens with the contracting company. and that is helping us to do things more confidently. We've got 2 or 3 plus we also do have an in-house contracting firm also this turns around INR 500 crores worth of product every year. But then that is not enough, but that's why we've got the external agency, which also helps us.
So no issue there in terms of like Bandwidth or...
As of today, there is no issue on the bandwidth, and if acquired, we will also look at many others as of today, we are -- whatever we've sort of narrowed down on 2, 3 big partnerships. We'll do this and then just moving from project to project.
Sure. Sure. The second question was on Slide 12, right, you give the segment-wise financials. Your EBITDA margin for resi is still at about 20%. How should we look at this number going ahead, especially over the next 3 to 5 years, considering the sales that we are lacking today?
Yes. I mean the thing is we are preselling and then building later see so that we have to protect the margins, and we have to make sure things are done correctly. Venkat also wants to add something. He's trying to tell something.
Also depends upon what projects came for revenue recognition. We spend a majority of the revenue. This [ mission ] has happened from one of our old progress in [ Kochi ] called [indiscernible] which had lesser margin. Therefore, you see lesser margins. Now the healthy mix of Mumbai and good margins in Bangalore. I think it will be reasonable to expect between [ 25% to 50% ] of EBITDA margin. .
Sure, sure. And lastly, on our BKC project 1012, what's the status there in terms of approvals and start of construction?
I think the approvals are there, we have been paying the premiums and already we finished the excavation and the LNP is the contractor, they've already started pouring concrete. The first 4 happened last week. Of course, you know what's happening in Mumbai, NCR, there's been a lot of issues on pollution and everything else. So we are trying to be very compliant and make sure that everything falls in place. And we don't be any problem of noncompliance. We also have to be sensitive towards the environment.
And just wanted to get your thoughts on the -- when would we start to -- or rather like start leasing these projects, both the BKC projects as well as the [indiscernible]
Leasing generally happens only when the property gets sort of ready or almost steady. There is interest shown both BKC as well as stuff from certain occupiers. But if I try to lease something today, obviously, I'll get a much sort of a slightly discounted rent -- but once the product is ready, the rent will be that much more higher. So we are not in any anxiety. I believe the type of product that we are trying to produce in both Mahalakshmi as well as in BKC, there should be more dearth of occupiers. Yes, it will give a huge move to the confidence that in case there's some large occupier that comes in. But I think the team is working even on that. But I don't see any anxiety insight on that aspect of it.
As there are no further questions. I would now like to hand the conference over to management for closing comments.
Thank you for your very, very active participation and insightful question. It's been a good quarter for us. Hopefully [Foreign Language] in do many more better quarters as we go along. And we wish the entire -- all the participants are very, very happy Diwali and a peaceful festival and may this festival bring you peace and many in our lives. Thank you so much.
Thank you, everyone. Thanks for your time, and wishing all of you a very happy Diwali. God bless all. Thank you.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.