Sunteck Realty Ltd
NSE:SUNTECK
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
American Express Co
NYSE:AXP
|
Financial Services
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Target Corp
NYSE:TGT
|
Retail
|
|
US |
Walt Disney Co
NYSE:DIS
|
Media
|
|
US |
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
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 |
385
630.05
|
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.
Johnson & Johnson
NYSE:JNJ
|
US | |
Estee Lauder Companies Inc
NYSE:EL
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Church & Dwight Co Inc
NYSE:CHD
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
American Express Co
NYSE:AXP
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Target Corp
NYSE:TGT
|
US | |
Walt Disney Co
NYSE:DIS
|
US | |
Mueller Industries Inc
NYSE:MLI
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Summary
Q2-2024
The company has reported that its financial numbers are based on current sales, not projecting future sales which are expected to enhance revenue figures over time. For FY'24, revenue from the Sunteck MaxxWorld project is anticipated to be between INR 750 crores to INR 850 crores, while the Sunteck City 4th Avenue ODC, Goregaon project estimates revenue in the range of INR 950 crores to INR 1,050 crores for FY'25, with potential increases factored in from additional sales. Operating margins are strong and on the uptrend, at 30% for Sunteck World and around 40% for the 4th Avenue project, indicating a bullish outlook on profitability. The company's equity deal with IFC allows for up to a 50% investment by IFC, with a waterfall structure yielding higher returns to Sunteck post certain IRR benchmarks. The first phase of Kalyan's launch includes 4 towers, with initial revenue potential from 2 towers expected to be around INR 600 crores. Lastly, the company noted increasing traction in pre-sales and anticipates quarterly incremental sales.
Ladies and gentlemen, good day, and welcome to Sunteck Realty's Earnings Conference Call for Q2 and H1 FY '24. We have with us today, Mr. Kamal Khetan, the Chairman and Managing Director of the company; Mr. Prashant Chaubey, the Chief Financial Officer; and Mr. Abhishek Shukla, the Vice President of Strategy and Investor Relations.
Please note, this call will be for 30 minutes. [Operator Instructions] This conference is being recorded, and the transcript for the same may be put up on the website of the company.
After the management's discussion, there will be an opportunity for you to ask questions. There is a Q&A session [Operator Instructions]
Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements, including those related to business statements, plans and strategies of the company, its future financial condition and growth prospects. These forward-looking statements are based on the expectations and projections and may involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements.
I would now like to turn the conference over to Mr. Khetan, the Chairman and Managing Director of the company. Thank you, and over to you, sir.
A very good afternoon to everyone for joining us today, and thank you for taking the time to participate in our company's earnings conference call for the second quarter and first half of the financial year 2024.
On the operational performance front, we have recorded a strong presales of INR 782 crores in the first half of financial year '24. Similarly, our customer collections have crossed INR 500 crores during the same time period. This strong cash flow has allowed us to further reduce our negligible net debt to INR 259 crores. With this, our net debt-to-equity ratio stands strong at 0.09x.
With respect to revenue recognition in the financial statement, as per Ind AS, the Indian accounting standards, the company follows the project completion method and not the percentage completion method of accounting. Hence, to understand the financials of the company better, it is suggested that one should look at earnings number on yearly basis rather than quarter-on-quarter basis.
In financial year '24, our project, Sunteck MaxxWorld, is getting completed. Due to this, a significant revenue of INR 750 crores to INR 850 crores shall be recognized by the end of financial year 2024.
Similarly, in FY '25, we are completing Sunteck City 4th Avenue in ODC, Goregaon West. This will lead to a revenue recognition of INR 950 crores to INR 1,050 crores by the end of financial year FY 2025.
With regards to project launches, we are happy to share that we have received all the approvals for the first phase of Kalyan projects and are gearing to launch the same before Diwali. Post Kalyan launch, Sunteck will have 6 large projects as growth engines. We are looking forward also to start our seventh project of Nepeansea Road as a new growth engine before the end of financial year -- in the financial year FY '25.
Over and above this, in financial year '24, we have completed 1 commercial project, Sunteck BKC51, which is fully leased out for 29 years. And now we are nearing completion the second commercial project, Sunteck Icon at BKC Junction, which will be also completed in financial year 2024. These 2 rented assets will fetch an average return of 30% on the invested capital.
I'm happy to share that we have tied up with international financial corporation, IFC, a member of World Bank Group, to create a joint platform with a total equity investment of INR 750 crores. This platform will focus on building high-quality, large-scale green housing projects targeting the mid-income demographics. This equity partnership is a testament to our strong systems and processes, scalable business model and focus on environment sustainability.
Talking about sustainability. We are also pleased to share that Sunteck Realty has received 5-star rating and has been ranked third in Asia Pacific diversified office and residential peer comparison by Global Real Estate Sustainability Benchmark, that's GRESB.
We have a strong conviction in our business model, and we look forward to a bright future as we continue to expand our horizons in a financially prudent way.
I will now hand over the call to Prashant Chaubey, our CFO, for more information on earnings performance of H1 FY '24. Over to you, Prashant.
Thank you, sir. Good afternoon, everyone, and welcome to the earnings call for the second quarter and first half of financial year 2024. The financial and operation numbers have already been published on the stock exchanges. I believe all of you must have gone through the same.
Let me give you some of the brief highlights of the financial performance. Our pre-sales stood at INR 395 crores, and collections stood at INR 214 crores for the quarter ended -- for the second quarter ended FY 2024. And I'm also happy to share that our pre-sales and collections CAGR since FY '21 has increased in tandem to 25% and 27%, respectively.
Our operating cash flow surplus has also surpassed INR 1,000 crores in the last 3.5 years. And for the quarter -- second -- for the first half ended FY '24, as the company follows project completion method of accounting, our revenue reported was INR 95 crores with a core EBITDA margin of 43%.
With this, we can now open the forum for questions from the participants. Thank you very much.
[Operator Instructions] We have our first question from the line of Sarang Gupta from Briarwood Chase Management LLC.
Congratulations on the strong quarter. I wanted to touch in on the deal with IFC because it's good to see a lot of confidence on the company and corporate governance in such a well-reputed institution. Can you just give us more background on this deal? Like how long have you been working on this or talking to IFC, what type of due diligence they did and why they chose Sunteck?
Thanks, Sarang, for the question. So we have been obviously working on this deal for almost -- more than 1.5 years, almost 2 years, I would say, and obviously, IFC being very prudent in their due diligence. So they have done all the due diligence looking financial, technical and economic, all the due diligence. And in fact, they visited multiple times to Mumbai from U.S. and they met each and every person in the senior management team, I would say. And to that extent, I think they visited each and every construction site also and seeing the quality and safety measures taken while doing the in-house construction.
And I could say that they were really very, very much impressed. And that's how taking to the transaction with IFC in an equity transaction -- this is an equity transaction, pure equity transaction. This platform will focus on building high-quality, large-scale green housing projects targeting the mid-income demographics. This platform will invest in new project acquisitions as we do not require any capital investment in our any existing projects.
This highlights, in fact, once again, I'll say, the strong brand recognition, sound financial and strong systems and processes, in-house construction capabilities of Sunteck. We expect definitely this platform to be substantially GDV accretive for Sunteck. Thanks, Sarang.
Mr. Gupta, does that answer your question?
Yes, that's helpful. And then just you mentioned GDV accretive. Like how big could this platform be? And kind of what time horizon are you looking at deploying this and then harvesting the returns from this platform?
So the size of the platform initially, what we have decided is INR 750 crores. And we want to -- obviously, this can add to another INR 8,000 crores to INR 10,000 crores of GDV accretion over a period of, let's say, 2 to 3 years what we are looking at.
We have our next question from the line of Puneet Gulati from HSBC.
And congrats on good numbers. Just continuing on this IFC deal once again. Can you [ set ] the broad boundaries that IFC has laid down in terms of what is the ticket size that you will be allowed to bring in, in terms of new units because I presume it is more affordable housing.
And second, what the geographies would you be able to operate it?
So yes, Puneet. So one thing I want to clear, it's not only affordable, affordable because we can go -- in the launch itself, we can go a minimum ticket size of INR 1.5 crores, so which is like mid-income focused. And it is more of a sustainable project.
So if you see we are in every project, whether it is IFC's a partner or not, so we are taking too much care and attention about ESG. And that obviously also has impressed them to invest in Sunteck platform, this joint platform.
So we are focused on the projects to be environment sustainable as well as, obviously, we are looking at mid-income segment more of deploying this money. But obviously, the ticket size should be close to INR 1.5 crores.
Okay. So that's decent ticket size. And in terms of ESG, are there some specific costs that you will have to incur to or initiative you'll have to do on the ESG front to meet the investment criteria?
So we are already doing -- that's what I told in my opening remarks that we are ranked third in the Asia Pacific, and that's a miniscule cost. I feel it's more an effort. But we don't mind spending that cost. We don't want to save that cost to compromise ESG.
Understood. That's very helpful. And secondly, if you can talk a bit about any price increases that you have taken in any of the projects this quarter?
So I would not say any substantial increase in prices across most of the projects. But in certain projects, I will not be -- I won't be able to give you anything specific right now. But at places like especially Sky Park and ODC, we have been able to increase, some price rise even in this quarter.
Okay. Lastly, if I may, the collections were down Q-on-Q. Can you help us understand the technicality behind it?
Prashant, will you be able to answer this?
So Puneet, our receivables from sales booked is in around INR 2,250 crores, which will come as we progress with the construction of our projects. So this time, what you see the collections is down. It's just that it's not a function of anything else. You will see those collections coming through in the coming quarters.
It's just the sales basically got down towards the last part of the quarter. Is that...
Yes. Yes.
We have our next question from the line of Abhinav Sinha from Jefferies India.
Congratulations on the IFC deal. Just going back to the initial questions there, you have already talked about how much you can add on GDV. So can you guide us when does this platform sort of become operational? And where do we see sales, say, in the next 3, 4 years?
So yes. So I would put it this question -- I'll answer this in 2, 3 parts. Like Sunteck is, obviously, we have been always well timed in our capital allocation by doing business development and acquisitions especially. So we feel this is a good time to do acquisitions and business development.
So today, if you see, we have a portfolio of 7 large projects, which are as good as almost launched with GDV value of close to INR 30,000 crores. And in next 2 to 3 years, I can say we want to grow -- irrespective of IFC platform, we are very confident that we want to grow this portfolio from INR 30,000 crores to INR 50,000 crores. And while doing so, we are ensuring that we are a balanced portfolio across all the segments from uber luxury segment to even the aspirational luxury segment.
I think, Abhinav, I have answered or if you have any other further questions or anything, which you want me to answer.
No, sir, on -- just dwelling a bit on this. I mean with around INR 300 billion of projects, we are doing around, let's say, INR 20 billion of sales. So that's the target for the current year. I mean, does this become materially, say, 2x in 3 years? Or we are looking to continue with the 20% CAGR or 15%, 20%? I mean that's what I was looking for.
So definitely, we will be adding more projects. From the existing projects, we can definitely look at growth of close to 15%, 20%. But from whatever adding projects, that will be additional. And if you put everything together, then obviously we look nearly double in close to 3 to 3.5 years or 4 years. Three years, we should double.
Okay. That's helpful. Sir, secondly, on P&L. You did mention that we are sort of -- because of the accounting issue, it's lagging a bit. Now a couple of things here. A, on the 2 projects that you have outlined for delivery. So these sales are already done or we are expecting, for example, ODC to see more sales to deliver this number? And b, what are the margins we are expecting here broadly?
So the numbers, which I have mentioned to you in my opening remarks and it's also on the presentation, which is uploaded, the numbers are from the existing current sales. We are not considering any sales till that time. That -- those sales obviously will come up more sales, and that will take definitely the revenue number to a higher number or on the upper side of the bracket.
So I've given a range, which will either surpass the upper range or the lowest, I've given the lowest range also. Like INR 750 crores to INR 850 crores for financial year '24, which will come from the MaxxWorld -- Sunteck MaxxWorld project. And INR 950 crores to INR 1,050 crores, which will further go up, obviously, with the additional sales, which is in the financial year '25. And that is from our Sunteck City 4th Avenue ODC, Goregaon project. And that's about it.
And what are the margins we are expecting?
Margins. So margins, Prashant?
Abhinav, Prashant, this side. So if you look in our case study also that we have published with our presentation, you will see that in the Sunteck World project, we are having an operating margin of 30%. And going forward, we are more bullish on that, that the margins will only go up.
Similarly, for our ODC project, we have given an operating margin of 35%. But 4th Avenue is operating at a much higher margin, which is close to 40%. So you will see that margins will be very strong going forward for both of these projects.
We have our next question from the line of Pritesh Sheth from Motilal Oswal.
First is on -- again, on IFC, just drilling in that a bit. So profit would be 50-50 shared? Or how is the sharing? Is there any minimum expectation of equity returns by IFC?
So Pritesh, yes. So [Foreign Language]. So there is no minimum return expectations. It's a pure equity deal. And they can invest maximum up to 50%, not more than 50%, but we can get them 25%, 30%. It has to be mutually agreed.
Also, we have a waterfall structure, which definitely gives us a much better return than what obviously IFC takes. So it depends on the IRR, what they made. After certain IRR hits, maximum profit comes to Sunteck and then only the nominal profit goes to them.
Okay. And what's that benchmark IRR, if you can just help us?
I think, that detail, I think we'll be able to share with you maybe separately. I don't think I'll be able to do it here, yes. Okay.
Sure, sure. No problem. Yes. And in terms of the Kalyan launch, which is upcoming, what is the initial size that we have thought about in terms of that launch? Is it a smaller launch or INR 1,500 crores, INR 2,000 crores kind of launch that we are planning?
So the first phase of Kalyan would consist of 4 towers what we are launching, but we are not launching the entire [ floor ] space. These are 4 towers and which will have obviously a revenue potential, as you rightly said, from INR 1,200 crores to approximately INR 1,400 crores.
Right now, what we are planning to launch is what we have got approval for 2 towers, which will have a potential sales of close to INR 600 crores.
So we'll go ahead with the 2-tower launch or we'll wait for another 2 towers and launch all together?
Obviously not. We will obviously go with the 2 towers launch, Pritesh. That's what we will do with the 2 towers launch.
We have our next question from the line of Ashutosh Mittal from Axis Capital.
So my first question is related to the amount spent on business development in Q2 and H1. How much of this is core projects not yet announced or not yet launched?
Can you repeat your question, please, Ashutosh?
So my question is related to amounts spent on business development in H1. So of this, how much is for -- toward projects that have not been announced yet or not launched yet?
So Pritesh, if you look at Slide 26 of our presentation, you will see that we have spent close to INR 64 crores on business development, landowner funding and JDA cost. Out of this, what is happening is the maximum majority of the amount is for our existing JDA projects and some of it is for our new projects.
Roughly, you can say around INR 10 crores to INR 15 crores is towards new projects, which has not been announced yet, and the balance is all for existing projects.
Okay. And my second question is related to how does the demand pipeline in BKC projects look? Specifically, if you can build it for Island and how does it look like for [ Island ]?
So we have already -- this quarter, we -- I think in pre-sales number, you must have seen we have sold 2 units. And I think this is obviously compared to last quarter, I think, and the quarter before that there was nothing.
So we are seeing the traction building up, and we are quite positive that this will continue every quarter-on-quarter. So we will see incremental sales, yes, in every quarter. Thank you. Anything else, Ashutosh?
We have our next question from the line of Anupama Prakash Bhootra from Arihant Capital.
Congratulations for a great set of numbers. I just want an update about for Sky Park, Mira Road contribution in Q2 still, if I can get something.
Anupama, Prashant, this side.So Anupama, out of INR 395 crores, roughly around INR 98 crores came from Sunteck Sky Park, Mira Road in the second quarter. Sunteck Sky Park, Anupama, has been -- the response for that project for Sunteck has been quite encouraging, and we are doing good sales there. Thank you.
Ladies and gentlemen, that was the last question for today. I would like to hand the conference over to the Chairman and Managing Director, Mr. Khetan, for closing comments. Over to you, sir.
Thank you all for taking out the time from your busy schedule today. In case if any of your queries have been left unanswered, you can get in touch with me or my team. We look forward for your continued support. Thank you, once again, for joining us.
Thank you, members of the management, and thank you all for taking out the time for Sunteck earnings call. In case if any of your queries have been left unanswered, you can get in touch with the team. We look forward to your continued support. Thank you.