ANSAL PROPERTIES & INFRASTRUCTURE

Transcription

1 ANSAL PROPERTIES & BUY REPORT ON ANSAL PROPERTIES & We initiate a buy cal on the stock with a target price of INR 65 for an investment horizon of one year

2 TABLE OF CONTENT CONTENT 1. COMPANY PROFILE 2. VALUATION & EARNINGS ESTIMATE 3. INDUSTRY OVERVIEW 4. COMPANY DESCRIPTION 5. MANAGEMENT 6. KEY STRENGTH 7. RESULT ANALYSIS 8. RISK ASSOCIATED 9. PEER GROUP COMPARISON 10. FINANCIAL OUTLOOK 11. CHARTS & GRAPHS 12. OUTLOOK & CONCLUSION 2

3 ANSAL PROPERTIES& Date:11 th JUL 2011 CMP = TARGET PRICE= 65 BSE Code NSE Code ANSALA Market Cap (Rs Cr) Week High/Low 100/32.85 Face Value Rs5 Shares O/S (MN) P/E 9.01 INDUSTRY P/E 6.88 INDUSTRY constructing &contractinghousing FII 20% Share Holding Pattern Public Indian corpor public others ate bodie s 10% 13% 3% Banks /FI's 1% Indian Prmot or 53% Ansal Properties & Infrastructure Limited (API) was incorporated in the year of The company has strong execution track record of developing 190 msf. Currently it is developing 282 msf of which msf (62%) is in the residential segment. The company has strong focus on integrated townships; it has 19 townships under development. The company has already executed 190 msf of projects. It has land reserves of 9,335 acres comprising saleable area of 282 msf in a pockets of the country which include Greater Noida, Ghaziabad, Meerut, Agra, Lucknow, Batindha, Mohali, Amritsar, Ludhiana, Jalandhar, Jaipur, Jodhpur, Ajmer, Sonepat, Panipat, Karmal, Kurukshetra, Faridabad and Gurgaon.The company has done appx. 50 big projects all over India. This company belongs to Ansal Group which has proven themselves as a milestone in the field of Property development and constructions. Main attraction of this company that Ansal API has very old land bank at very attractive valuation. VALUATION Outlook & Valuation Summary If one go by financials of Ansal API, at Market cap of 649 Cr. With a sales revenue of Rs.1093Cr.(FY10-11) EPS of the company being Appx. Rs. 5/-. The book value of Ansal API is Rs. 83 i.e. Stock is available price to book value only at 0.52 times. The company has lot of potential to go up with limited down side risk.driven by accelerated and profitable revenue recognition from the large townships, we expect the company s top line to grow at a healthy rate of 25% FY12E to Rs 13.6bn.The company is well poised to capitalise on the opportunities and grow faster than its peers.ansal API trades at a P/E of 6.67X for FY12E earnings which we think is available at a steep discount. APIL s 9,335-acre land bank (average cost of Rs180psf; ~74% acquired) further enhances its competitiveness. Since the stock offers good opportunity, we initiate a buy call on the stock with a target price of Rs 65 an upside of 49% from the present levels. Research Analyst: 3 Tanvi Sharma tanvi@incredibleadvisory.com

4 EARNINGS ESTIMATES: Outlook: FY09 FY10 FY11E FY12E SALES (Cr) PAT (Cr) NPM (%) EPS APIL posted a strong operational performance in FY11. It sold a record 22.4msf (vs. 13.6msf in FY10) and achieved sales value of ~Rs24bn (Rs10.6bn in FY10) a 65% increase in volumes and 126% increase in sales value yoy. Average realization increased by 37% yoy to Rs1,067 psf (Rs777 in FY10). Also, customer advances increased sharply (Rs15.3bn in FY11 vs. Rs7.1bn a year ago) as construction activity gathered pace (Rs5.1bn in FY11 vs. Rs3bn in FY10). Successful launch of mega townships (Lucknow and Greater Noida) underlines APIL s credentials as a leading township developer INDUSTRY SNAPSHOT The real estate sector contributes approx 5-6% to india s GDP.This sector has attracted one of the highest levels of FDI in india,having recorded FDI inflow to the sector from april 2000 to sep 2010 was US $8.9 billion,of which US$ 2.8 billion was invested in alone. The residential real estate industry has witnessed significant growth in the past few years due to growth in population, migration towards urban areas, job opportunities in service sectors, increase in nuclear families growing income levels and easy availability of finance. In short span of time, the industry has evolved from a highly fragmented and unorganized market with a large no of listed companies. There is significant shortage of low cost and affordable housing in the country. The commercial real estate segment has benefited from growth in the Indian economy. Business activity is shifting from central business district to special business district (SSBD) and from tier I to tier II cities. Developing a SEZ is approx 15 to 20 per cent less expensive than developing non SEZ commercial space, given the various fiscal benefits available to SEZ developers. Several real estate developers have been attracted to these projects. 4

5 COMPANY DESCRIPTION APIL was incorporated on 30 June 1967 as Ansal & Saigal Properties Private Limited. The company was promoted jointly by the late Mr. C L Ansal (father of Mr. Sushil Ansal) and Mr. Sushil Ansal, the present chairman of APIL. APIL focused on commercial and residential developments in the CBD of Delhi in the early years of operations and achieved some landmark developments, including Akash Deep (first high-rise multistoried building with basement), Surya Kiran (first 13-storied commercial building with multiple basements) and Vikas Minar (tallest building of Delhi (to date) for the Delhi Development Authority Evolution of APIL 1967 : APIL incorporated as Ansal & Saigal Properties Private Limited 1975 : Change in name to Ansal Properties and Industries Private Limited 1988 : Became a deemed public limited company in : Became a public limited company in :APIL listed on the stock exchanges 1998 : Trifurcation of the Ansal Group management with Mr. Sushil Ansal managing APIL exclusively Incorporation of Ansal Township & Land Development Ltd (ATLDL) by Mr. Pranav Ansal 2004 :Change in name to Ansal Properties & Infrastructure Limited 2005 :Change in name of ATLDL to Ansal Township & ProjectsLimited (ATPL) on June 23 rd 2006 :ATPL merged with APIL Completed the largest Domestic QIP placement in India (~Rs6.8bn) In the early years of its operations, APIL was engaged in developing the vertical format of commercial and residential buildings in the CBD and SBD of Delhi and has delivered more than 6msf of commercial and more than 12msf of residential buildings to date. A few of its landmark developments Key developments of APIL Building name Size (msf) Description Amba Deep 0.2 Architectural award winning commercial building in Delhi CBD Ansal Bhawan 0.19 Multi-storied commercial building in Delhi CBD Antriksh Bhawan 0.23 Commercial building with revolving restaurant atop in Delhi CBD Surya Kiran 0.22 Multi-storied commercial building in the CBD of Delhi Sushant Shopping Arcade 0.42 Shopping and commercial building in Gurgaon Statesman House 0.28 Architectural marvel in the CBD of Delhi Palam Vyapar Kendra 0.29 Shopping and commercial office building in Gurgaon Apartments at Aurangazeb Road 0.12 Multi-storied apartment building in the CBD of Delhi 5

6 Gauri Sadan, Dhawan Deep 0.1 Multi-storied residential apartment buildings in the CBD of Delhi Valley View Estate 1.9 Multi-storied residential apartment complex in Gurgaon Celebrity Homes 0.5 Multi-storied residential apartment complex in Gurgaon Sunshine County 1.34 Residential apartment complex in Haryana Green Escape 2 Multi-storied residential apartment complex in Haryana Ansal Plaza- Delhi 0.2 First retail mall of Delhi and North India on a sell and lease model Ansal Plaza Palam Viha 0.35 Retail mall in Palam Vihar, Delhi MANAGEMENT The key personnel details are given as under: Name & Designation Mr. Sushil Ansal, 71 years, Chairman Mr. Pranav Ansal, 42 years Vice Chairman & Managing Director Mr. Anil Kumar, 51 years Joint Managing Director & Chief Executive Officer Mr. Vijay Jindal, 53 years Additional Director & Joint Managing Director Brief Profile Has an experience of 46 years in real estate development,industry and and business and has promoted the company, holds a bachelor s degree in economics from St. Stephen.He was previously chairman of Overseas Construction Council of India and president of the PHD Chamber of Commerce & India Has a bachelor s degree in commerce from the Delhi University. He has varied experience, expertise and business acumen in the real estates business. He has contributed significantly to the success of Ansal Township & Projects Limited the Company in A bachelor s degree in commerce from Delhi University, a bachelor s degree in law from Chaudhary Charan Singh University,Haryana,a diploma in company Law from Indian law institute, experience of 26 years. He is a fellow member of the institute of chartered accounts of India.joined the company as vice President-finance on July Has a Bachelors degree with Honours in ag.economics from PAU, Ludhiana & a master's degree in business administration from college of basic sciences & humanities,pau,ludhiana.he has more than 30 years of experience in managing businesses,brands,private equity investment & under taking strategic initiatives 6

7 APIL s key strengths ANSAL PROPERTIES & Affordable housing at the core of the strategy APIL is a pioneer of affordable housing projects, having started horizontal development (township planning over a large area) since the late 1980s. With presence in tier II/ III cities and focus on plotted and low-rise developments (independent floors, villas, etc), the company has to date developed and delivered 2,258 acres (~98.4msf) of integrated townships and handed over 1,666 acres (72.6msf) of other plotted developments. Average realizations have been in the range of Rs600-1,200psf, with offerings in small to mid-sized products. Township development key competency APIL started as a commercial and residential developer in Delhi and has some landmark developments to its credit. However, the focus subsequently shifted to integrated townships and affordable housing. APIL is developing townships in NCR and key cities in North India, operating as a master-plan developer. Till date, the company has developed and delivered ~2,258 acres (98.4msf) of integrated townships. The company is currently working on 19 townships with gross saleable area of 311msf (including ~40msf of area delivered from ongoing projects). Proven execution skills >230msf delivered to date APIL is one of the oldest names in NCR and a leading property developer with strong brand equity (popularly known as Ansal API ). The company has, to date, developed and delivered 2,258 acres (~98.4msf) of integrated townships, handed over 1,666 acres (72.6msf) of other plotted developments at various locations in Delhi and Haryana, and 21.5msf of vertical developments including commercial, industrial and residential built-up area. Large and low-cost land bank acquired at competitive prices APIL has accumulated significant and high-quality land reserves (~9500 acres, ~37% in NCR) with most of it licensed (64%) and acquired (74%). Including the two large hitech townships (combined area of >5,000 acres; excluding 965 acres in Lucknow Phase II as development agreement is yet to be signed) and 17 other townships under development, APIL has a gross saleable area of 311msf (Ansal s share 238msf) under its belt with ~90msf already sold (APIL s share in the remaining area of 221msf is 168msf). The company has acquired most parcels at competitive prices (average acquisition cost of Rs180psf). Older developments: Book value vs. market value APIL has constructed most of the office buildings in the CBD, Delhi (35-36 completed buildings). Although most of these properties have been sold, APIL still holds some space in the buildings. Given current market prices, the value of such space is much higher than the costs of construction incurred. Along with the aforementioned commercial space, the company also holds some prime residential plots (in Sushant Lok and Palam Vihar) and residential units in the older townships that would be sold at a higher rate. Overall, APIL has +3.4m sqft from such older properties. These older properties, kept on the books for a considerable while, act as mortgage for enhanced credit lines, given that their market value today is much higher than their book value 7

8 RESULT ANALYSIS ANSAL PROPERTIES & Profit & Loss (Rs. in Million) Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 No of Months Gross Sales Less :Inter divisional transfers Less: Sales Returns Less: Excise Net Sales EXPENDITURE : Increase/Decrease in Stock Raw Materials Consumed Power & Fuel Cost Employee Cost Other Manufacturing Expenses General and Administration Expenses Selling and Distribution Expenses Miscellaneous Expenses Expenses Capitalised Total Expenditure PBIDT (Excl OI) Other Income Operating Profit Interest PBDT Depreciation Profit Before Taxation & Exceptional Items Exceptional Income / Expenses Profit Before Tax Provision for Tax PAT Adj to Profit After Tax Profit Balance B/F Appropriations Equity Dividend (%) Earnings Per Share (Rs.) Book Value (Rs.)

9 Balance Sheet(Rs. in Million) Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006 SOURCES OF FUNDS Share Capital Share warrants & Outstandings Total Reserve Shareholder's Funds Secured Loans Unsecured Loans Total Debts Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Lease Adjustment A/c Capital Work in Progress Pre-operative Expenses pending Assets in transit Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Other Current Assets Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets / Liabilities Total Assets Contingent Liabilities

10 RISK ASSOCIATED KEY RISKS Execution risk APIL is developing two large hi-tech townships with >2,500 acres in size. Successful Execution of such townships will require significant increase in execution capabilities. While APIL has developed and delivered large townships in the past, forte in developing Hi-tech townships of such scale is yet to be established. Liquidity risk APIL s gross debt stands at Rs15.6bn (as of March 2011) with a D/E ratio of 0.86x. With debt repayment of >Rs9bn due over the next two years (Rs6.4bn in FY12E), we believe APIL will have to generate significant cash flows or resort to debt refinancing which may Increase interest burden. Also, the cost of debt is higher at ~15% and any operational Slowdown could hurt profitability. Concentration risk We see geographic risk with APIL s focus on developments in the North Indian states of UP, Haryana, Punjab and Rajasthan. Also, APIL does not have any plans to diversify Beyond the existing regions. Brand dilution The Ansal brand is currently shared among three brothers. Though the three Businesses are independent and have no conflict of interest, any negative news flow on The other companies could affect APIL s image. Uphaar Cinema case The Uphaar Cinema tragedy is almost forgotten, but the case is yet to be closed. Any Negative outcome of future hearings could not only impact APIL s reputation but also hit The company financially in case of higher compensation. Government policies and regulations Township policies (especially hi-tech township policy) are governed and regulated by The state governments. Any change in the government policy or change in the ruling Party could affect the viability of such projects. 10

11 COMPARISON WITH PEER COMPANIES ANSAL OMAXE PARSVNATH SOBHA API DEVELOPERS DEVELOPERS Mkt Cap EPS P/E SALES(Cr) PAT(Cr) NPM (%)

12 FINANCIAL OUTLOOK Stellar FY11 volumes expected to continue APIL has consistently delivered strong volumes over the last few years, including during the downturn when sales had almost dried up for most other developers. In FY11, the company sold a record 22.4msf (highest in APIL s history) on the back of strong demand in the Lucknow Township (11.4msf sold; 4msf of plotted sales and 4.5msf of FSI sales). Going forward, we expect the volume momentum to remain strong (~52msf to be sold over FY12-14E) in view of buoyancy in the affordable housing segment and strong response to APIL s townships. Strong cash flow and earnings visibility over the next 2-4 years APIL has sold ~90msf from its existing land bank until FY11, garnering a total sales value of Rs76bn. Of this, the company received Rs45.5bn in customer advances and has recognized revenues of Rs41.2bn to date. This implies that Rs34.8bn of revenue recognition (in the next 2-4 years) will happen only from the sold stock. With Rs30.6bn of cash receivables and land already paid for, this provides significant visibility on revenues and cash flows going forward. Revenues to register 28% CAGR over FY11-13E With >Rs30bn to be recognized from sold stock and considerable improvement in execution, we expect 28% revenue CAGR for APIL over FY Also, we expect Essencia II to contribute to revenues from FY13 and become the key engine driving the expected 44% yoy revenue growth in FY13E EBITDA margins to improve FY09 was a challenging year for the entire real estate sector, including APIL. Though the company sold ~12msf, EBIDTA margins declined sharply to 19% primarily due to lower realizations and higher administrative overheads. While recognition from past sales is keeping the margins muted, we expect them to increase to 33% by FY13E as the launch of Essencia II and golf villas/ group housing in Lucknow help drive margin expansion D/E ratio to reduce to 0.5x by FY13E With ~Rs1.6bn of debt reduction in FY11, APIL s net debt now stands at Rs14.8bn and D/E ratio at 0.86x. With improved execution leading to higher cashflows, we do not see debt as a concern. However, APIL has fairly large debt repayments of Rs6.4bn due in FY12E.APIL is planning to reduce its debt by about Rs 350 crore in through its cash flows.overall, we expect APIL to reduce debt by ~Rs3.5bn over FY12-13E, which will bring down the D/E ratio to a comfortable level of 0.5x We expect 40% CAGR in PAT over FY11-13; PAT margins at 8.5% Driven by potentially strong execution and improving EBITDA margins, we expect 40% PAT CAGR for APIL over the next two years. PAT margin should also improve from 6.97% in FY11 to 8.5% in FY13E 12

13 Index Comparison Performance Chart Source: bseindia.com The performance chart shows that with the increase in the net sales the net profit has also shown a considerable increase but the market cap still remains the same. Therefore there is a lot of potential in the stock of the company which needs to be trapped. 13

14 According the Goldman Sach report on Indian Real Estate, India is currently facing a housing shortage and we conservatively estimate that demand in large cities would outstrip. Which should augur well for listed developers largely exposed to the residential market? They initiate on the India real estate sector with an Attractive coverage view. According the Goldman Sach, top pick in the real sector is Ansal Properties and Infrastructure. NUTSHELL We believe that the company is to witness robust growth going forward owing to its strong & proven execution skills, Large and low-cost land bank acquired at competitive prices.significant growth visibility in three of its largest projects (Lucknow, Greater Noida and Gurgaon) and >Rs30bn of pending cashflows on sold projects enhances comfort on near-term profit growth. Keen focus on affordable housing, where in demand remains buoyant, is a key competitive edge in the prevailing challenging times for the sector. We Expect 28% and 44% CAGR in revenues and PAT over FY11-13, driven by accelerated and profitable revenue recognition from the large townships. The company has lot of potential to go up with limited down side risk. 14

15 Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Reliable investors are advised to satisfy themselves before making any investments. Incredible Advisory Services Pvt Ltd does not bear any responsibility for authentication of the information contained in the reports and consequently is not liable for any decision taken based on the same. Incredible advisory services Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. INCREDIBLE ADVISORY SERVICES PVT. LTD. Flat No. 103 (Bharat Chambers) First Floor, 70-71, Scindia House Connaught Place, New Delhi Phone/fax: info@incredibleadvisory.com 15

16 16 ANSAL PROPERTIES &