Prestige Estates Projects Ltd Stock Research Report

GROWTH DRIVEN BY BUSINESS MODEL……

Prestige Group, founded in 1986, stands as one of India’s leading and most prominent real estate developers. Originating in Bangalore, where it holds a significant market share, the company has expanded its presence across several metro cities. The group has made a mark across all asset classes and with over 38 years of experience, it has completed more than 300 projects, delivering over 180 Mn sq. ft.

Key Rationale

◼ Launch trajectory for H2FY25:

The management has guided a pre-sale of ~Rs24,000 Cr for the financial year. In H1FY25, the company has achieved the pre-sales of~ Rs8,000 Cr. The management is confident in achieving their guidance and launching major projects during the remaining quarters. These launches will include projects like Prestige Southern Star, Prestige City-Indirapuram, Pallava Gardens etc. The remaining launches will have a GDV of Rs 52,000 Cr, which could result in Pre-sales of ~Rs 20,000-Rs 22,000 Cr. This would comply with management’s guidance of pre-sales numbers with a possibility of exceeding the same during FY25.

◼ Execution Supremacy:

Prestige has recorded its best-ever pre-sales of ~Rs 21,000 Cr and the highest-ever collections of Rs 11,950 Cr in FY24. The company has delivered 25 Mn sq. ft in FY24 with over 300 projects completed. In FY24, it has also managed to achieve 75% of its sales from newly launched projects at ~Rs 15,700 Cr, demonstrating its execution capability and excellence in delivering large projects. The Prestige City Hyderabad achieved sales worth Rs 3,700 Cr within 4 months of its launch. On average, the company has sold 10,068 units, which means an average of 28 units per day in FY24.

Prestige Estates Projects Ltd Stock Research Report

◼ Strong Cashflows and Net debt reductions:

The company has completed its QIP for Rs5,000Cr. These funds will be utilized for repayment of debt, BD and construction for rental assets. The free cash flows expected from ongoing and upcoming projects stand at Rs 13,863Cr and Rs 32,037Cr respectively. This gives a total of ~Rs 45,000Cr in free cash flows expected for the company. The collections for Q2FY25 stood at Rs 2,737Cr (PEPL share: Rs2,554Cr). The company’s debt stands at ~Rs 10,000Cr and the net debt is Rs 3,592Cr. This indicates a net debt-to-equity ratio of 0.21 which is within their guidance. This will comfortably fund the future capex of Rs ~13,000Cr for their annuity portfolio build-up.

◼ Additional GDV & Annuity Stream:

With the company acquiring a stake in PPP, and Prestige Acres among others, the company has added an additional Rs 20,000 Cr of GDV to their portfolio. The cost of acquisition incurred by them is ~Rs 844 Cr and will eventually lead to a pre-tax EBITDA of Rs 8,000Cr. The company’s annual rentals stand at Rs523 Cr for commercial projects and Rs 226 Cr for retail projects. The remaining capex spend to be incurred is Rs 9,000Cr for commercial properties and Rs3,46Cr for its retail assets. Their annuity rentals are due to produce exit rentals of Rs 4,300 Cr by FY29 (assuming full occupancy).

◼ Outlook & Valuation: We maintain a BUY recommendation on Prestige Estates. Based on our DCF valuation method

Key Financials (Consolidated)