Sunteck Realty (SRL) clocked robust new sales of Rs 3.5 bn in Q3FY21 (up 7% y-o-y, 75% q-o-q) aided by release of new inventory in ODC 4. Management stated that momentum in housing demand is sustaining in each completed/almost total inventory and below-building projects. The organization intends to launch the Vasai, Vasind and Naigaon Phase III projects/phases next year.
SRL’s wholesome leverage and asset-light technique will enable it to improve project portfolio at a wholesome pace, in our view. We think launches/pre-sales will identify the stock’s trajectory. Maintain Buy with a TP of Rs 463.
Robust pre-sales finest-ever collections: SRL delivered Rs 3.5 bn in pre-sales in Q3FY21, up 7% y-o-y and 75% q-o-q. Sales have been aided by ~Rs 1.2 bn in bookings from newly launched inventory in ODC 4. Management indicated the powerful housing demand is attributable to the stamp duty reduce in MMR and low mortgage prices. Unlike final quarter, when ~80% of bookings pertained to currently completed projects (such as Sunteck High and ODC Phase I), this quarter witnessed great demand for below building projects (~60% of bookings).
We think this indicates the strength of underlying demand. The organization is seeking to total the two industrial projects in BKC more than the next 12–18 months. Collections throughout the quarter came in at Rs 2.5 bn (up 52% y-o-y, 79% q-o-q) and are the finest ever for the organization. Consequently, net debt slid ~Rs 320 mn q-o-q to Rs 7.6 bn. Net debt to equity stands at a wholesome .27x (.28x in Q2FY21).
Strong launch pipeline to enhance sales momentum: By H1FY22, SRL intends to launch projects in Vasai and Vasind as properly as the new phase in Naigaon (Phase III). We think the launch of these projects will be a crucial milestone that would assistance SRL enter the next level of development. In addition, the organization has prospective unsold inventory worth Rs 13–14 bn in ODC projects (out of which ~Rs 10 bn is in ODC 4) and ~Rs 5 bn in Naigaon Phase I/II.
Outlook: Attractive— RERA-driven consolidation bodes properly for SRL provided its low gearing, which gives space to add projects and develop its NAV. We stay positive on the company’s extended-term prospects and keep ‘BUY/SN’ with a TP of Rs 463 (on a par with an NAV of Rs 463) whilst continuing to comply with the old accounting requirements.