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Informist, Wednesday, Jan. 29, 2025

By Aman Aryan

MUMBAI – Having fallen in last four consecutive quarters, the net profit of Prestige Estates Projects Ltd. could get a boost due to strong growth in realisation driven by the premiumisation trend. Although launches by real estate companies slowed down during the quarter, the ongoing consolidation in the industry is expected to boost the company's revenue and net profit for the quarter, analysts said.

The real estate company's consolidated net profit for the December quarter is seen rising 93% to INR 2.24 billion, an average of estimates from four brokerage firms showed. Its net profit contracted 77%, 13%, 70%, and 9% in the previous four quarters. Estimates for the company's net profit range from INR 2.01 billion by Motilal Oswal Financial Services Ltd. to INR 2.68 billion by Nuvama Wealth Management Ltd. 

The Bengaluru-based company's consolidated revenue for the December quarter is expected to increase 40%, its strongest growth in four quarters, at INR 25.21 billion, according to an average of estimates from four brokerages. HDFC Securities Ltd. has the lowest estimate for the company's revenue of INR 23.74 billion whereas Motilal Oswal's estimate of INR 28.13 billion is the highest. Sequentially, its net profit is likely to rise 17%, alongside a probable 9% increase in revenue.  

Unlike previous quarters, Prestige Estates has not provided the exchanges with an update on its operational performance for the December quarter yet. Analysts are divided on their view on the company's pre-sales for the quarter. Although new launches were muted in the quarter across the sector, Prestige Estates launched White Meadows in Bengaluru, Motilal Oswal said. Strong response to its new projects and robust sustained sales is expected to maintain the company's momentum despite a high base, the brokerage added. 

Motilal Oswal expects the real estate company's volume growth for the December quarter to be slower than its pre-sales growth. This is mainly due to the increase in overall prices and average ticket size. The company may post pre-sales of INR 65 billion, up 22% on year, and volume of 6.2 million square feet, up 13% on year, Motilal Oswal said.     

On other hand, Kotak Institutional Equities and HDFC Securities expect pre-sales to fall 25% and 31% on year, respectively. Project launches for Prestige Estates have been delayed, affecting its pre-sales during the December quarter, Kotak Institutional Equities said in its earnings preview. HDFC Securities also said challenges related to approvals affected the launches across the sector in the quarter. New launches would have likely plunged 20% on year, Nuvama said.

The company is expected to report earnings before interest, tax, depreciation, and amortisation of INR 7.16 billion in the latest quarter, according to the average of estimates from four brokerage firms. The company's EBITDA margin would have likely been 27% during the December quarter, Motilal Oswal said.

Revenue from housing or residential sales, the major segment in the company's portfolio, is expected to grow 50% on year in the quarter on a low base, Kotak Institutional Equities said. The number of units sold in India's top seven cities would have likely dipped 23% on year in the December quarter, Nuvama said, citing ANAROCK Property Consultants. The bulk of the bookings in the housing segment currently pertain to the luxury or premium variants where ticket sizes are high, Nuvama added. Average prices would have likely risen 21% on year.

Demand in the commercial segment is also picking up, Nuvama said, and added that this is driven mainly by robust domestic growth and higher outsourcing due to weak economic conditions in other developed markets such as the US and Europe. The retail and hospitality segments are back to normal, the brokerage added. Companies in the hospitality business are expected to report healthy earnings for the December quarter due to a high-single digit year-on-year improvement in the average room rate, Kotak said. 

EXPECTED LAUNCHES
While the third quarter would have likely seen a slowdown in launches, HDFC Securities expects it to surge in the following quarter as approvals from the Real Estate Regulatory Authority are expected to materialise. Prestige Estates will likely launch projects with a gross development value of INR 300 billion in the March quarter, thus resulting in strong pre-sales in the quarter, the brokerage said. 

The new launch trajectory is a key thing to watch out for Prestige estates, Nuvama said. New launches in the March quarter may cover up for the weak December quarter and the pre-sales shortfall in the first nine months of the current financial year, according to HDFC Securities. The real estate company had earlier said it recorded sales of INR 70.52 billion during the first six months of the current financial year, down 36% on year.

On Wednesday, shares of Prestige Estates closed at INR 1,318.40 on the National Stock Exchange, up 3.7%. The stock is down nearly 20% from its closing price of Oct. 30, a day after Prestige Estates had released its earnings for the September quarter after market hours. Of seven brokerage reports on the company available with Informist, six have a 'buy' or equivalent rating and one has a 'reduce' rating. The company will release its earnings for Oct-Dec on Thursday. 

Following are the Oct-Dec earnings estimates for Prestige Estates Projects based on reports compiled by Informist from four brokerages in descending order of the estimate of net profit:

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Reported by Akul Nishant Akhoury

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