Q4FY23 Review: Brigade Enterprises: Strong operating performance

26 May 2023 , 01:15 PM

Brigade Enterprises (BRGD) reported the highest-ever pre-sales for Q4FY23/FY23. Mgmt remained bullish on Residential demand and is targeting strong launches in FY24 with expanding presence in Chennai, apart from its core Bangalore market. Commercial Leasing momentum has been gradual but steady, despite weak macro environment. Hospitality portfolio witnessed improvement in ARRs; and mgmt continues to evaluate monetising the portfolio. Net debt was up QoQ on land payments; ~75% is on the Annuity portfolio backed by LRDs.

Residential— highest-ever pre-sales in Q4: 

BRGD reported its best ever quarter in terms of pre-sales, Rs14.9bn (up 45%/47% YoY/QoQ). FY23 pre-sales came in at Rs41bn up 36% YoY. The strong performance was aided by launches of 3msf for Q4 (~60% of pre-sales), taking full-year launches to 5.5msf; up 45% YoY. On the concall, management highlighted that demand from mid-to-upper segment remains strong with no signs of slowdown, and preference for larger units from homebuyers. Mgmt expects to launch ~7.5msf over next 3 quarters (with a GDV of Rs60bn), although it remains contingent on approvals. No specific pre-sales guidance for FY24; maintains ~20% Cagr guidance over a 5yr period. 

Annuity — Leasing momentum healthy despite tough milieu: 

In the Leasing business, there was incremental leasing of 0.2msf in Q4 (FY23 leasing at 1.2msf), leading to overall occupancy levels of the 8.7msf portfolio at 85%. BTG and WTC are now 75% and 81% leased respectively. Mgmt expects them to be leased out over next 2-3 quarters, largely on expansion demand from existing occupiers. Retail malls had a strong performance in FY23, with rentals increasing 13% YoY. In the Hospitality segment, ARRs have improved sharply on a QoQ basis.

Robust outlook; BUY: 

BRGD paid out Rs3.8bn of land arrears largely for the TVS land parcel in Chennai, which led to net debt rising QoQ by Rs1.8bn to Rs14.7bn. ~75% of gross debt is backed by LRD and higher leasing, especially for BTG/WTC; any transaction in Hospitality segment can further reduce debt. Residential debt declined further to Rs0.5bn, among the lowest in listed Real Estate universe. Analysts of IIFL Capital Services SoTP-based target price of Rs600 implies 10% upside; reiterate BUY.