Religare Research has reiterated ‘buy’ on HDIL while reducing the target price to Rs 976 from Rs 1,334, an upside of 112 per cent.
HDIL's April-June 2008-09 revenues increased 29 per cent year on year to Rs 570 crore, in line with the brokerage’s estimate, as the company booked sales on projects covering 0.5million square feet and on land development rights of 5.5 million square feet.
A dominant share of commercial and SRS projects saw the EBITDA margin surging above Religare’s estimate to 85 per cent in Apr-Jun 2008-09 from 54 per cent in the same year-ago quarter. The strong operational performance enabled profit after tax to increase 57 per cent year on year to Rs 320 crore, ahead of the brokerage estimate of Rs 210 crore, despite a sharp rise in interest costs.
Work on the Mumbai airport SRS project has begun during the quarter, with 53 acres of land acquired from IL&FS for rehabilitation of existing occupants. In the first phase, HDIL will develop 6-8 million square feet of rehabilitation area with simultaneous construction of five million square feet of saleable area. The first phase is expected to be completed in 18-24 months with a dedicated labour workforce of over 3,000 personnel, 10 contractors and over 100 engineers.
In light of higher interest costs during the quarter, Religare has moderated their earnings estimates for FY09E and FY10E. They have also reduced their valuation for the airport project to Rs 306 from Rs 436 to account for the rising cost of debt and increased market risk. Similarly, these macro concerns see them cutting back their valuation for the core construction business from Rs 898 to Rs 670.
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