Real Estate Q3FY19 Result Preview – Residential sales to be driven by affordable housing, commercials to remain robust

We expect real estate sector’s Q3FY19 performance will be driven by strong volume in affordable and mid-size residential theme, while lease rentals may go up in commercials.

Jan 17, 2019 05:01 IST India Infoline News Service

We expect real estate sector to witness a robust growth in both commercial and residential segments for the quarter ending December 2018. Commercial segment is likely to remain in a sweet spot with sustained momentum in demand for office space in top cities. Rentals are expected to rise as a result of higher demand coupled with decline in the availability of the quality office spaces across major locations. On the residential side, affordable and mid segment theme is expected to witness strong demand, while sales in premium housing space to continue to be muted owing to elevated levels of unsold inventory.

As the disruptions caused by RERA implementation and demonetization are behind, real estate sector in India will continue to consolidate with large and compliant players continuing to keep expanding their market share in the medium to long run. We believe consolidation in the sector to accelerate from here on driven by recent NBFC-led liquidity concerns. We expect strong and organized realty players will significantly gain from liquidity crunch, which will recede only gradually over the few quarters.

We are bullish on Sobha, Oberoi Realty and Sunteck Realty from our coverage universe. Due to adoption of IND-AS 115 w.e.f. April 01, 2018, Q3FY19 numbers are not comparable on yoy basis.

Q3FY19 Results estimates

In Rs cr Change %
Godrej Properties Q3FY19 yoy qoq
Sales          502               -19.9             27.7
EBITDA            12               -74.3         -202.3
EBITDA Margin (%) 2.4 (500)bps 531bps
PAT            75              148.8           120.5

• We expect qoq revenue to grow by 27.7% driven by traction in residential segment.
• Reduction in net gearing on the back of cash flow generation is the key monitorable.

In Rs cr Change %
Brigade Enterprises Q3FY19 yoy qoq
Sales          709                 67.1            -14.2
EBITDA          195                 22.7             45.0
EBITDA Margin (%) 27.6 (1000)bps 1126bps
PAT            63                 28.5              -7.5

• We expect revenue growth of 67.1% yoy. 
• New sales to maintain momentum during Q3FY19, driven by new launches during the quarter.
• Commentary on realization trend and new launches to be key monitorables.

In Rs cr Change %
Oberoi Realty Q3FY19 yoy qoq
Sales          654                    83.5               -34.5
EBITDA          333                    72.7                 92.5
EBITDA Margin (%) 50.9 (318)bps 3357bps
PAT          220                    82.1                 84.1

• We expect strong performance on yoy basis with revenue, EBITDA and PAT to grow at 83.5%, 72.7% and 82.1% respectively.
• The company may exhibit strong traction in incremental construction and stable rental income from Oberoi mall.
• Update on Thane project and timeline on Commerz-III are the key monitorables.

In Rs cr Change %
Sobha Developers Q3FY19 yoy qoq
Sales          682                 -1.5                3.5
EBITDA          145                   5.3                3.3
EBITDA Margin (%) 21.2 137bps (4)bps
PAT            62                 14.8                0.6

• We expect yoy PAT to grow at 14.8% driven by healthy expansion in the EBITDA margin.
• Update on launch of planned projects, Bengaluru residential demand, outlook on commercial capex and balance sheet improvement are key monitorables.
In Rs cr Change %
Sunteck Realty Q3FY19 yoy qoq
Sales          254                 26.1             40.9
EBITDA          109                 22.1             39.5
EBITDA Margin (%) 42.8 (140)bps (44)bps
PAT            68                 14.1             32.7

• We expect top-line to witness strong growth driven by incremental construction and sales in ongoing projects, especially its affordable housing project at Naigaon near Mumbai.
• Sales momentum for BKC and Goregaon projects to be key monitorable.

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