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Informist, Monday, Oct. 28, 2024

By Aman Aryan

MUMBAI – After posting a mixed operational performance for the September quarter, real estate developer Prestige Estates Projects Ltd.'s Jul-Sept earnings are expected to fall significantly year on year as its residential segment revenue fell due to lower project completions in the quarter. While the company's consolidated net profit is seen down on year, its revenue is seen slightly up on a high base. In Jul-Sept of the previous year, the company's other income rose 22 times to INR 10.20 billion, boosting its consolidated net profit for that quarter.

The company's consolidated net profit is expected to fall 80% on year to INR 1.72 billion but its consolidated revenue is seen up 3% on year to INR 22.99 billion, according to the average of estimates from six brokerage firms. Analysts' estimates for the company's consolidated net profit vary significantly, with the lowest estimate of INR 872 million from Motilal Oswal Financial Services and the highest estimate of INR 3.04 billion from Elara Securities. Estimates for the company's consolidated revenue range from INR 20.87 billion by HDFC Securities to INR 25.65 billion by Nuvama Institutional Equities.

The company is expected to report earnings before interest, tax, depreciation, and amortisation of INR 6.9 billion in the latest quarter, according to the average of estimates from five brokerage firms. The company's EBITDA margin is likely to be 25%, Motilal Oswal said.

Although Prestige Estates launched key projects in Mumbai and Bengaluru and completed two Bengaluru projects in the latest quarter, the company reported a weaker quarter on an operational basis. On Oct. 17, the company had said its quarterly sales were down 43% on year to INR 40.23 billion. Prestige Estates sold fewer units in the latest quarter as compared to the year-ago quarter and its sales volume more than halved to 3 million square feet from 6.8 million square feet a year ago, the company had said in its quarterly operational update. 

With the 43% on-year fall in the company's sales, the latest quarter is the only Jul-Sept quarter in the last five financial years when the company's sales have fallen on year. Despite reporting lower sales in the quarter, the company's Jul-Sept collections rose 3.7% on year to INR 27.37 billion, representing the second lowest on-year Jul-Sept growth in the last five financial years, second only to the 1.4% fall in the year-ago quarter.

Analysts had expected modest sales for real estate players across the industry due to the prolonged monsoon, delays in approvals leading to fewer launches, and lack of substantial inventory. Prestige Estates also saw limited big launches in the latest quarter.

Housing or residential sales, the major segment in the company's portfolio, are expected to have fallen 11% on year in the quarter in the top seven cities in India, Nuvama said. With lower sales volume and launches, the brokerage said an uptick in prices and premiumisation in the market would likely have helped sales for real estate companies. While ANAROCK Property Consultants estimated a 23% rise in the average price in the latest quarter, Prestige Estates' average realisation for apartments and flats rose 33% on year to INR 13,782 per sqft and its average realisation for plots fell 1.5% on year to INR 6,654 per sqft.

While the residential segment is expected to have seen pressure across the industry, the retail and hospitality segments are expected to have seen an uptick in occupancies, Nuvama said. The occupancy rate for hotels across the industry has improved back to pre-COVID levels and the average room rate and revenue per available room have surged 29-32% against the pre-COVID levels in August, the brokerage cited ANAROCK's report. The company's hospitality segment is expected to see a sequential improvement in the September quarter, Kotak Institutional Equities said.

Prestige Estates' commercial business is likely to have been boosted by recently commissioned assets, Kotak Equities said. Property consultancy JLL India expects about 20 million sqft office area, the second-highest ever during any quarter, would have been leased in the top seven cities in the latest quarter across the industry. JLL said Bengaluru – about 43% of the company's sales came from this city in the previous quarter – is likely to have contributed 24.6% of the total leasing activity across the industry in the latest quarter. With more companies transitioning from remote work to hybrid and full-time office models, the demand for office spaces has surged, HDFC Securities said.

During the quarter, the company had raised INR 50 billion through a qualified institutional placement. Of this, the company had said it will use INR 15 billion to reduce debt, INR 17.5 billion to acquire land, and the remaining funds will be used for capital expenditure projects and general corporate purposes. 

The real estate sector is expected to remain buoyant for the next two to three years on the back of a favourable demand-supply balance, a comfortable inventory position, healthy pricing power and a market consolidation opportunity, Motilal Oswal said.

On Monday, shares of Prestige Estates ended at INR 1,655.25 on the National Stock Exchange, down 3% from the previous close. The company is scheduled to report its earnings for the September quarter on Tuesday.

Following are the Jul-Sept earnings estimates of Prestige Estates based on reports compiled by Informist from six brokerages:

End

Edited by Ashish Shirke

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