Stock market outlook

The current market price of the share is Rs 457.90 each. The 52-week low is Rs 379 each recorded on June 20, 2022, and the 52-week high is Rs 554 each recorded on January 18, 2021. Considering the current market price and the estimated target price, the stock could increase by about 34% in 12 months.

Returns over the past 5 years

During the week, the stock fell 3.44%. While in the past 1 and 3 months, it gave a negative return of 2.56% and a positive return of 15.08% respectively. Over the past year, it has given a positive return of 7.54%. Over the past 3 and 5 years, it has given positive returns of 52.48% and 75.71%.

Robust Residential Pipeline

PEPL recorded a pre-sale of Rs.3,012 crs in Q1FY23, up 310% YoY. The area sold increased from 1.1 msf to 3.63 msf in Q1FY22 and collection doubled to Rs. 2,146 crs during the same period. The company has 29 ongoing projects (40.3 msf) and 31 upcoming projects (60 msf), which are expected to drive sales momentum and have the potential to generate free cash flow of around 20,000 crs.

Stable cash flow supported by increased annuity

Annuity income is expected to reach Rs.1,000 crs (Rs.250crs in FY22) in the next 2-3 years adding 7.18 msf to the rental portfolio (~3msf in FY22). Bangalore and Mumbai hold the largest share of development, as IT/financial hubs. In the near future, Rs. 860crs of rental income is expected to be added from its 15 ongoing projects, and the share in the sales mix will increase from 4% to 9%. The increase in leased assets will improve the EBITDA margin and provide stable cash flow to PEPL. The Mumbai projects will begin construction by Q2FY23 and are expected to be completed in 4 years. The potential income from these projects is Rs. 1,300 PA.

Healthy balance sheet

PEPL strengthened its balance sheet by reducing the net debt ratio to 0.35 (FY22) from the average level of 1.13 in FY19-21. The improvement is mainly attributed to the deduction of debt for assets sold to Blackstone in FY20 and used this cash inflow to settle a few other debts. PEPL said it intended to keep its debt ratio around 0.5 going forward.

Evaluation

According to the brokerage, “Given its strong balance sheet, robust launch pipeline, industry consolidation, better affordability over the past two and a half decades, the weak residential cycle in recent years provided a solid foundation for a rebound.Therefore, we value the company at 2.3x FY24E adjusted book value and recommend a BUY with a target price of Rs. 611.”

Disclaimer

The stock was picked up in Geojit’s brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.