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Parsvnath Developers _PARDE_

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					November 5, 2007 | Real Estate


Initiating Coverage
Parsvnath Developers (PARDE)                                                                                Current price
                                                                                                               Rs 326
                                                                                                                                      Target price
                                                                                                                                         Rs 465
                                                                                                            Potential upside         Time Frame
                                                                                                                  42%                 12 months
  More for less…
 Parsvnath Developers is developing more real estate than any other                                              OUTPERFORMER
 realty company in India. Apart from differentiating it from other
 companies, this will also help it generate positive cash flows, and buy
                                                                                                Analyst name :
 more land for future purposes. Further, its exclusive contract with the                          Rupesh Sankhe
 Delhi Metro Rail Corporation (DMRC) will provide stability to its cash
                                                                                                  rupesh.sankhe@icicidirect.com
 flows. We initiate coverage with an outperformer rating.
                                                                                                  Sheetal Malpani
                                                                                                  sheetal.malpani@icicidirect.com
 Pan-India presence, proven execution capabilities
  Parsvnath has a pan-Indian presence across 47 cities in 17 states. It is            Sales & EPS trend
 developing 153 million sq ft of saleable real estate over the next 4-5 years.
 Its landbank is mostly fully paid up and has clear title. Further, the cost of its
 land under development is about Rs 260 per sq ft, which is amongst the                                   6000                                     40
 lowest, and hence will significantly add to its bottom line and help it                                                                           30




                                                                                                                                                        EPS ( In Rs)
                                                                                         Sales ( In Cr)
 maintain the high margins over longer period of time.                                                    4000
                                                                                                                                                   20
                                                                                                          2000
 Diversified portfolio mitigates asset risk                                                                                                        10
 The 153 million sq ft the company is developing is spread over 33                                          0                                      0
 residential project (32.63 million sq ft), 22 commercial project (4.73 million                                  FY06   FY07     FY08E   FY09E
 sq ft), 18 integrated townships (77.55 million sq ft) and 4 IT parks (6 million
 sq ft). We believe the company will be able to withstand any downturn in                                               Sales      EPS (Rs)
 any segment by having presence in all segments.

 Cash flow from DMRC rentals to provide stability
                                                                                      Stock Metrics
 The company has bagged a contract from the DMRC to develop 12 metro
                                                                                      Promoters holding                                          80.33%
 malls. These projects will bring in the cash flows amounting Rs 1,130 crore
                                                                                      Market Cap                                          Rs 5,842 crore
 by FY12 annually. This contract in on an exclusive basis and the successful
                                                                                      52 Week H/L                                              579 / 222
 completion by FY12 will definitely add to the company’s brand image and
                                                                                      Sensex                                                      19984
 will improve chances to bagging more government projects.
                                                                                      Average volume                                             428141
 Valuations
 Parsvnath’s proven execution capabilities, diversified land reserves and
 better visibility in earnings make the stock an attractive investment bet.           Comparative return metrics
 Factoring in a price escalation of 2.5% annually, the projected NAV comes            Stock return (In%)                          3M          6M         12M
 to Rs 423. We have assumed a 10% premium to arrive at our target price of            Unitech                                   43.91 75.63        98.84
 Rs 465.                                                                              Sobha Developers                           9.37     6.58        NA
                                                                                      DLF                                       58.73      NA         NA
                                                                                      Ansal properties                           (.62) (16.34)     (41.9)

Exhibit 1: Key Financials
 Year to March 31                 FY06         FY07         FY08E          FY09E
 Net Profit                      106.46       292.97        521.72        636.47
 Shares in issue (crore)          98.91        18.47         18.47         18.47
 EPS (Rs)                         10.76        15.86         28.25         34.46
 % Growth                                      47.37         78.08         21.99
 P/E (x)                                       20.55         11.54          9.46
 Price/Book (x)                    2.87         1.23          2.91          2.21
 EV/EBIDTA                        14.60        11.22          5.47          4.72
 RoNW (%)                         52.93        20.03         26.29         24.28
 RoCE (%)                         37.34        20.30         34.18         32.65
Source: ICICIdirect Research
 ICICIdirect | Equity Research
                                                                                                                        1|Page
Company Background
                                                                                                  Share holding pattern
Parsvnath Developers is one of the leading players in the real estate industry in
                                                                                  s
India. The company was incorporated in 1990 and commenced business as a                           Share holder                                                     % holding
marketing company for real estate projects. It then forayed into construction of                  Promoters                                                            80.33
residential projects, and currently has operations across 47 cities in 17 states.                 Institutional investors                                               5.06
Parsvnath has in-house material purchase and construction capabilities with no                    Other investors                                                       4.74
third-party dependence. Over the years, the company has gradually reduced its                     General public                                                        9.87
dependence on residential projects by diversifying into commercial, integrated
township and SEZ (special economic zone) space.
                                                                                                  Promoter and Institutional holding trend
The company came out with a public issue of 3.32 crore equity shares of Rs 10
each with a price band of Rs 250-300 per share in November 2006. The issue                                                100
was subscribed over 50 times. Parsvnath has raised the bar for the real estate




                                                                                                    % Holding In Shares
                                                                                                                          80
industry and was awarded the ISO 9901 and 14000 certifications.                                                           60
                                                                                                                          40
                                                                                                                          20
                                                                                                                           0
Exhibit 2: Business Model                                                                                                       Q3FY07         Q4FY07        Q1 FY 08       Q2 FY08
Segment         Business Model                                Revenue Model
                Standalone dwelling units, row houses and                                                                                    oter
                                                                                                                                         Prom Holding Institutions and Others
Residential                                                   Build and sell (100%)
                high rise apartments
                Shopping malls, multiplexes and office
Commercial                                                    Sell (20%) and lease (80%)
                spaces
                Mixed use of large areas comprising plotted
Integrated      developments, villas, apartments and other    Sell residential and sell/lease
townships       common amenities like healthcare and          others
                schools
                DMRC malls on Built -Operate-Transfer (BOT)
DMRC projects                                                 100% lease
                basis
                                                              Transfer operation to established
Hotels         5-star, 4-star and 3-star hotels
                                                              player
SEZs           IT/ITES, single product, multi product         Sell and lease
Source: Company, ICICIdirect Reserach




                                                                                                                                  2|Page
Investment Rationale

    Pan-India presence
Parsvnath has a pan-Indian presence across 47 cities in 17 states. It is
developing 153 million sq ft of saleable real estate over the next 4-5 years. Its
landbank is relatively low risk, as a majority of the land is already in
possession. Further, the cost of its land under development is about Rs 260
per sq ft.

Exhibit 3: Geographical presence
 State                     Cities
 Delhi                     Civil Lines, Inderlok, Pratrap Nagar, Tis Hazari, Seelampur
                              Agra, Greater Noida, Noida, Lucknow, Ghaziabad (Indirapuram,
 Uttar Pradesh                Kaushambi), Moradabad, Mohan Nagar, Saharanpur,
                              Sahibabad and Khekhra
                              Dharuhera (Rewari), Faridabad, Gurgaon, Kurukshetra, Rohtak,           Parsvnath has a presence in
 Haryana
                              Sonepat, Panchkula, Karnal and Panipat                                 virtually every nook and
                              Derabassi, Malerkotla, Mohali, Rajpura, Chandigarh and                 corner of the country, thus it
 Punjab
                              Amritsar                                                               is proxy to India’s real estate
 Rajasthan                    Bhiwadi, Jaipur, Jodhpur,                                              story.
 Kerala                       Kochi
 Uttaranchal                  Dehradun and Haridwar
 Andra Pradesh                Hyderabad
 Gujrat                       Ahmedabad
 Madhya Pradesh               Indore and Ujjain
 Maharashtra                  Pune, Shirdi and Mumbai
 West Bengal                  Siligudi
 Goa                          Sangolda (Goa) and Panaji
 Karnataka                    Mysore
 Tamil Nadu                   Kancheepuram
 Jammu & Kashmir              Jammu
 Jharkand                     Ranchi
Source: Company, ICICIdirect Reserach

The total cost of construction per sq ft comes very less as land acquisition
cost is very less and this gives company cushion against any downturn in the
industry and also shows the ability of the company to acquire land at minimal
cost.

Exhibit 4: Cost break-up of projects
                                                                                          Total
                                  Saleable area                      Construction and     cost      Parsvnath cost of land for
                                                    Land cost (Rs                         (Rs       different projects is very less
 Vertical         Projects        (million sq ft)   crore)           dev (Rs crore)       crore)    and this will help the
 Residential                 32             32.63           1233                  3855       5088   company to maintain the
 Commercial                  22              4.74            765                    866      1631   margin, even if the projects
 Integrated                                                                                         are delayed for sometime due
 townships                18                79.9             1366                6276       7642    to any slowdown in the
 DMRC                      6                1.73              349                 320        669    sector.
 Hotels                   17                2.27              145                 599        744
 IT parks                  4                6.01               4.6                644        649
 SEZs                      4               26.18               68                4557       4625
 Total                   103              153.46           3930.6               17117      21048
Source: Company, ICICIdirect Reserach




                                                                                                             3|Page
    Residential projects
Parsvnath has become a strong brand in residential segment. The
company has acquired the necessary expertise and specialization in
constructing high-rise apartments and row houses. It is developing 32
residential projects on completion would translate into 33 million sq ft of
saleable area. This is expected to fetch the company revenue to the tune of
Rs 8,000 crore spread over next 4-5 years. We expect the company to
develop and sell 6.54 million and 8.86 million sq ft of residential space in
FY08 and FY09 respectively.

Exhibit 5: List of Residential projects

Project                  City             State             Area In ( Mn Sq ft)
Parsvnath Panorama       Greater Noida    Uttar Pradesh                    .68
Parsvnath Palacia        Greater Noida    Uttar Pradesh                    .62
Parsvnath Residency      Moradabad        Uttar Pradesh                    .06    Parsvnath          constructs
                                                                                  residential buildings for all
Parsvnath Prestige       Noida            Uttar Pradesh                    .53
                                                                                  income groups – high,
Parsvnath Pratibha       Moradabad        Uttar Pradesh                   1.08    middle-class and low. Even
Parsvnath Priliage       Greater Noida    Uttar Pradesh                   2.05    parsvnaths        residential
Parsvnath Planet         Luck now         Uttar Pradesh                    .98    portfolio is well diversified
Parsvnath Premium        Pune             Maharashtra                      .51    across region.
Parsvnath Paramount      Delhi            Delhi                            .15
Parsvnath Panchavti      Agra             Uttar Pradesh                    .34
Parsvnath Exotica        Gurgaon          Haryana                         2.46
Parsvnath Pleasant       Rewari           Haryana                         1.79
Parsvnath Majestic
Towers                   Ghaziabad        Uttar Pradesh                    .21
Parsvnath Green Ville    Gurgaon          Haryana                         1.06
Parsvnath Regalia        Ghazi bad        Uttar Pradesh                    .34
Parsvnath Exotica        Ghazi bad        Uttar Pradesh                   1.91
Parsvnath Sterling       Ghazi bad        Uttar Pradesh                    .15
Parsvnath Royale         Panchkula        Haryana                           .58
Parsvnath Platinum       Greater Noida    Uttar Pradesh                     .21
Parsvnath Pristine       Sonepat          Haryana                          .87
Panchvati                Agra             Uttar Pradesh                    .29
Parsvnath Royal Villas   Goa              Goa                             .032
Parsvnath Exotica Ext.   Gurgaon          Haryana                          .26
Parsvnath Prominence     Bhiwadi          Rajasthan                        .92
Total                                                                    18.18
Source: Company, ICICIdirect Research


    Commercial projects
The company is also developing 22 commercial projects and this will result
in saleable area of 4.74 million sq ft. The total cost of these projects is
estimated at Rs 1,631 crore. The company plans to develop nearly 2.8
million sq ft till FY09 and the rest will be completed by FY12. When
complete, it plans to lease out these commercial premises. Timely
completion of projects will provide stable cash flows and help it to acquire
newer pockets of land.




                                                                                           4|Page
Exhibit 6: Select List of Commercial projects
 Project Name                    Location          Developable Area ( Mn sq Ft)
 Parsvanth Plaza 3               Moradabad                                0.03
 Parsvnath City Centre           Bhiwadi                                  0.20
 Parsvnath Mall Matrix           Mohali                                   0.15
 Parsvnath Square                Moradabad                                0.16
 Parsvnath City Centre           Moradabad                                0.08
 Parsvnath City mall             Faridabad                                0.17
 Parsvnath Eleganza              Dehradun                                 0.15
 Parsvnath Mall Eighteen         Noida                                    0.05
 Parsvnath Shoppers Den          Noida                                    0.04
 Porject Galleria                Ahmedabad                                0.11
 Platto Plaza                    Panjim                                   0.33
 Kurla Bus Depot                 Mumbai                                   0.03
 FilmCity                        Chandigarh                               1.38
 Total                                                                    2.87
Source: Company, ICICIdirect Research



    DMRC malls
The project covers an area of 19,400 sq ft with a developable area of 250,000
sq ft. The project aims to meet the shopping requirements of the public use the
metro. The company has already entered into concession agreements to
develop more shopping malls near 12 stations owned by the DMRC on a build-
operate-transfer basis. Construction of 6 is already completed.

Parsvnath bagged a contract from the Delhi Metro Rail Corporation (DMRC) to
develop an ultra modern fully air-conditioned shopping mall outside Netaji
Subhash Place Metro Station in North Delhi. The mall is located at a prime
location on Ring Road and is expected to attract huge footfalls.

Exhibit 7: Select details of DMRC project
 Project                                        Developable area ( In Mn sq ft)
 Metro Mall, Inderlok                                                             0.09
 Metro Mall, Inderlok Annexe                                                      0.05
 Metro Mall, Seelampur                                                            0.39
 Metro Mall, Seelampur                                                            0.03   Parsvnath Developers is the
 Metro Mall, Tis Hazari                                                           0.02   only developer in contract with
                                                                                         DMRC for developing Metro
 Metro Mall, Pratap Nagar                                                         0.02
                                                                                         Malls and that will generate
 Metro Mall, Singh Marg                                                           0.32
                                                                                         significant cash flows from
 Metro Mall, Kashmere Gate                                                        0.34   company from FY12.This will
 Metro Mall, Shahsdra                                                             0.10   also give company a brand
 Metro Mall, Azadpur                                                              0.03   visibility across capital.
 Metro Mall, Akshardham                                                           0.30
 Total                                                                            1.69
Source: Company, ICICIdirect Research




                                                                                                   5|Page
  Integrated townships
Parsvnath plans to construct 18 integrated townships spread over 80 million
sq ft till FY12. The townships will have houses, villas, apartments, hospitals,
schools and other facilities. The company has already developed 4.4 million
sq ft of townships till date. The townships are expected to cost Rs 7642 crore.
While part of the townships, particularly residential houses will be sold, the
rest will be leased out. We expect the company to roll out 21.59 million sq ft
area in next financial year.

    Special Economic Zones (SEZs)
The company has aggressive plans in SEZ. It has received in-principle
approval for 12 SEZs, which will translate into 26 million sq ft of saleable area.
The company has formed a separate company for these SEZ by the name
Parsvnath SEZs. The company plans to develop both single product and
multi-product SEZs. The company will lease out half the SEZ and sell the
other half.

Exhibit 8: SEZ details
 Location                         Sector                       Land ( In Acres)
 Gurgaon                          IT/ITES                                  114
 Dehradun                         IT/ITES                                   35
                                                                                     SEZ     business   will   add
                                                                                     significantly   to  company
 Indore                           IT/ITES                                   76
                                                                                     bottom        line      going
 Kochi                            IT/ITES                                   76       forward.Parsvnath is one of
 In-principle approval                                                               the early entrants into this
 My sore                          IT/ITES                                  119       business segment and hence
 Kundli                           Bio-tech                                  25       will enjoy the first mover’s
 Agra                             Leather                                            advantage
 Moradabad                        Handicraft                               247
 Jaipur                           Gems and jewellery                       113
 Pune                             Automotive                               247
 Kancheepuram                     Multi Product                           2470
 Kundlii                          Food Processing                          247
Source: Company, ICICIdirect research




                                                                                              6|Page
    De-risked business model
Due to its diversification, the company is less vulnerable to any slowdown in
one of the real estate verticals. Its pan-India presence also gives it a cushion
against regional imbalances. Recently, it decided to foray into multiplexes and
hotels to further de-risk its business model. The company expects to garner
Rs 1130 Cr lease income annually to have cash flows to meet the capital
requirements.

Exhibit 9: Land Bank Diversification (Area Wise)


                        SEZs
          IT parks                                 Residential
                        17%
             4%                                       22%

          Hotels
           1%
                                                          Com m ercial
          DMRC
                                                              3%
           1%




                                 Int Townships
                                       52%

Source: Company, ICICIdirect


    Commendable execution capabilities
The company has developed 11.07 million sq ft till FY07, of which 53% was
residential and integrated townships accounted for 40%. The company will
develop 154 million sq ft by FY12. This will provide the company huge cash
flows and capital to acquire other realty properties for development. Its fast
execution, which is reflected in rising completion and booking volumes. will
make the company's IRR higher and this will bring value to shareholders.


Exhibit 10: Execution plans (Mn sq ft)
 Project type                       FY08E           FY09E                FY10E
                                                                                   The execution across segments
 Residential                          6.54            8.96                 7.53
                                                                                   will increase, thus parsvnath
 Commercial                           1.31            1.74                 0.92    will be able to capture the
 DMRC malls                           0.63            0.48                 0.06    opportunities available in any
 Integrated townships                10.95           21.59                25.04    segment.
 Hotels                               0.39            0.64                 0.77
 IT parks                             0.31            0.96                 1.68
 Total                               20.13           34.37                   36
Source: Company, ICICIdirect Reserach




                                                                                              7|Page
Exhibit 11: Execution Roadmap

  40
  35
  30                                                                                  Execution at healthy pace
  25                                                                                  to drive earnings visibility
                                                                                      and wiil prepare the
  20
                                                                                      company      for    future
  15                                                                                  challenges
  10
   5
   0
           FY08E (Mn sq ft)            FY09E(Mn sq Ft)            FY10E(Mn sq ft)
                                           Year

            Residential   Commercial    DMRC      Int Townships   Hotels   IT parks

Source: Company, ICICIdirect Research


    Land acquisition strategy
Parsvnath does not intend to partake in acquiring premium land parcels at
high prices through auctions. The company has one of the lowest average
costs of acquisitions. It acquires agricultural land from farmers and private
landowners as well as the government. It plans to concentrate on suburban
areas of major Indian cities, which are witnessing rapid growth. This helps in
improving margins and thereby sustaining higher growth momentum.

    Clear land titles
Parsvnath's entire land bank falls in government-approved zones and it has
clear title deeds on almost the entire land bank, which it is currently
developing. This ensures that all the revenues will flow to the company and
generate more cash flows to fund other projects. This helps to get project
approval faster and thus results in faster execution




                                                                                               8|Page
    Recent developments

Parsvnath Developers entering telecom sector
In August 2007, Company announced that it will be forming a special purpose
vehicle (SPV) to foray into the mobile services space. The company has             We have not factored any impact
submitted applications to the Department of Telecom for providing unified          of this development in the
access service in 22 telecom circles across the country. The company will          valuation, as we believe that it
hold at least 26% stake in the SPV. It has identified two prospective partners –   this business will take significant
one domestic investor and a renowed global telecom giant for its proposed          time to contribute to companys
foray.                                                                             revenue

Get final notification for Dehradun SEZ
Parsvnath Developers recently received final notification from the government
to set up an information technology special economic zone (SEZ) at
Dehradun. The project, to be executed by the firm's unit Parsvnath SEZ Ltd,
will involve an investment of about Rs 1,050 crore. The company has two
other notified SEZs for IT at Indore and Gurgaon.




                                                                                                9|Page
Risks & Concerns

     Interest rate and NAV sensitivity
The key risk associated with our calculation is any change in property prices
and construction costs. A 100 bps increase in interest rate from our base
estimates could decrease the NAV to Rs 406 per share. A 100 bps decline in
interest rates could hike the NAV to Rs 442 per share.

Exhibit 12: Sensitivity Analysis
                                    Sale price escalation
  Interest Rate               0%                 2.50%           5%
      12%                     457                   462          468
      13%                     437                   442          447
      14%                     418          424 2 423             428
      15%                     402                   406          411
      16%                     386                   391          395



    Risks related to execution
Parsvnath aggressive real estate development activity poses significant
execution challenges. In the next 3-4 years, the company plans to develop
property that is about 10x what it has done so far.

    Interest rate risks
Any further increase in interest rate might affect sales and also increase the
funding cost for the projects. This could squeeze margins and also put
pressure on company balance sheet.

    Regulatory changes
Any changes in local land laws or regulations governing the real estate sector
could adversely affect the company. For instance, the withdrawal of tax
benefits to real estate developers in the recent budget. Political changes could
also disrupt the company's plans and financials.




                                                                                   10 | P a g e
Financials

     Robust Growth in Revenues, Net profit
Parsvnath Developers expects to develop 153 million sq ft of residential,
commercial, and SEZ projects by FY12.
Revenues are expected to grow at a CAGR of 155% over FY07-09 to Rs 5310
crore from Rs 800 crore. Net profit is expected to increase at a CAGR of 48%
to Rs 639 crore from Rs 292 crore. While we believe the company will be
progressively scaling up its execution capabilities, we have assumed flat sales
realizations and a 4% increase in construction costs.

Exhibit 13: Healthy growth in Net sales


                                 6000
                                 5000
          Sales ( In Cr)




                                 4000
                                 3000
                                 2000
                                 1000
                                   0
                                         FY06     FY07                 FY08E            FY09E

                                                             Sales


Source: Company, ICICIdirect Research

Exhibit 14: Robust Growth in Net profit and EPS


                                 700                                                            40
                                 600                                                            35
                                                                                                30
          Net Profit ( In Cr )




                                 500
                                                                                                     EPS ( In Rs)




                                                                                                25
                                 400
                                                                                                20
                                 300
                                                                                                15
                                 200                                                            10
                                 100                                                            5
                                   0                                                            0
                                        FY06    FY07           FY08E            FY09E

                                                Net Profit           EPS (Rs)

Source: Company, ICICIdirect Research




                                                                                                                    11 | P a g e
Valuation

    NAV valuation By segment

We have valued Parsvnath Developers using a net asset value (NAV)
approach by discounting the free cash flows from all projects. We believe a
NAV valuation is most appropriate for real estate companies due to following
reasons:
1. Given the large land bank that the company will develop over a period of
time, cash flows from projects are discounted to take into account the time
value of money.
2. An earning-based methodology distorts valuations, as profits due to the
appreciation in the value of land bank do not get reflected in the earnings.
Only the development margin gets reflected in the earnings.
3. The NAV method is suitable for projects that have a mix of residential,
commercial & retail projects, as all these has very different cash flow timings.

Residential projects valued at Rs 111 per share
We have assumed the company will develop 59.55 million sq ft of residential
projects by FY12. We estimate the total free cash flow to equity at Rs 2051.38
crore, we arrived at Rs 111 per share.

 Estimated Value of Residential projects
 Free cash flow to firm                                               Rs 3,158.38 crore
 Debt                                                                    Rs 1,100 crore
 Free cash flow to equity                                             Rs 2,051.38 crore
 No. of equity shares                                                       18.47 crore
                                                                             Rs 111.10
 NAV per share (Rs)
Source: ICICIdirect Research

Commercial and retail projects valued at Rs 75 per share
The company intends to develop 18 integrated townships comprising 80
million sq ft of development and 19.36 million sq ft of IT and hotel properties
by FY12. These will have a lease-based revenue model at an average rate of
Rs 45 per sq ft at 15% incremental price every 3 years. We have calculated
the capital value of commercial and retail properties by applying a capital rate
of 12%.

For commercial and retail segments, we have assumed a discount rate of
16%, higher than that for residential projects considering the risk associated
with the occupancy level over longer period of time.

 Estimated Value of Commercial Projects (including retail and IT parks )
 Free cash flow to firm                                                    Rs 3199.94 cr
 Debt                                                                        Rs 1355 cr
 Free cash flow to equity-post tax                                          Rs 1383.7 cr
 No. of Equity Shares                                                           18.47 cr
 NAV per share                                                                    Rs 75
Source: ICICIdirect Research




                                                                                           12 | P a g e
Value of DMRC projects estimated at Rs 53.62 per share
DMRC malls has been valued by discounted the cash flows at the rate of 13%.
We have assumed 95% occupancy for the properties and the period of lease
will be 30 years.

 Estimated of Value of DMRC Projects
 Free cash flow to firm                                     Rs 2101.01 cr
 Debt                                                         Rs 623.9 cr
 Free cash flow to equity, post tax                          Rs 990.26 cr
 No. of Equity shares                                            18.47 cr
 NAV per share (Rs)                                              Rs 53.6
Source: ICICIdirect Research

Value of SEZ estimated at Rs 95.15 per share
While valuing the SEZ business, we have discounted the cash flows at 14%,
because it is very sensitive to the approvals by the government.


 Estimated Value of SEZ Business

 Present value of cash flow @ 13 % discount                 Rs 1,756.5 cr

 No. of equity shares                                            18.47 cr

 Equity value per share (Rs)                                    Rs 95.15
Source: ICICIdirect Research

Value of other businesses, including JV
We have assumed that the company would sell plots upfront and realize the
full value at the time of sale. Given the similar risk profile of residential
development, we have assumed the same rate of discount. Over FY07-10 E,
the company is expected to develop and sell 54.9 million sq ft, which will
generate equity cash flows of Rs 1,176 crore. Discounting these cash flows at
14% discount rate, we value development of plots at Rs 57.18 per share.


 Estimated Value of Plots

 Present value of cash flow @ 14 % discount                  Rs 1,055.7 Cr

 No. of equity shares                                             18.47 Cr

 Equity value per share (Rs)                                      Rs 57.18
Source: ICICIdirect Research



Capitalized value of land at Rs 30.08 per share
We have assumed the company will keep the land after the termination of
leasable period. The present value of that land has been calculated by
assuming a 5% appreciation on CAGR basis.

 Estimated Value of Capitalized Land
 Capitalized value per sq ft                                    Rs 570.92 c
 No. of equity shares                                               18.47 cr
 Equity value per share (Rs)                                       Rs 30.88
Source: ICICIdirect Research




                                                                                13 | P a g e
Parsvnath total NAV break up segment wise

  Sum of Parts NAV break Up
 Residential -NAV per share                                                    Rs 111
 Commercial -NAV per share                                                      Rs 75
 DMRC -NAV per share                                                            Rs 54
 SEZ -NAV per share                                                             Rs 95
 Plots –NAV per share                                                           Rs57
 Capitalized value -NAV per share                                               Rs 31
 Total NAV per share                                                           Rs 423
Source: ICICIdirect Research

Stock to trade at a 10% premium to NAV
Parsvnath Developers is developing more than any real estate developer in
India till FY10 With its strong execution plan, we expect the company to
generate huge cash flows which will in turn help the company to upgrade its
NAV by successfully acquiring the land for further expansion purposes and
therefore we believe the company to trade at 10% premium to Its NAV, giving
us a target price is 465.

Exhibit 15: International Peers trading at premium ( NAV in their respective Currency)
                                 Mkt Cap (In USD                     Premium/(Discount)
 International Outlook:                       Mn)     2008 NAV                    to NAV
 Country :China
 China Overseas Land                      16,965           10.7                         67
 Guangzhou R&F properties                  15869           20.5                         87
 Shimao Property Holdingd                   9885           21.7                          7
 China Resources Land                       7706           13.4                         20
 Country :Singapore
 Capitaland                               14994             5.8                         39
 City Developments                         9541            11.4                         39
 Keppel Land                               3969             8.7                         -4
 Country :Hong Kong
 Sun Hung Kai Properties                  38687             103                         17
 Hang Lung Properties                     17817            22.6                         49
 Henderson land Development               15279            64.6                         -5
 Sino Lnad                                12415            15.8                         33
 Hong Kong Holdings                        9869              5.4                        20
Source: Bloomberg, ICICIdirect Research




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Financial Summary

Profit and Loss Account
                                                             ( Rs Crores)
 (Year-end March)          FY06           FY07      FY08E          FY09E
 Sales                    823.74        2722.80    3425.47        5310.67     Higher operating income
 % Growth                                230.54      25.81          55.03     due to fast execution
 Op Profit                225.41         605.25    1161.21        1489.73
 % Growth                                168.51      91.86          28.29
 Depreciation               5.88          14.40      18.11          30.57
 EBIT                     219.53         590.85    1143.10        1459.16
 % Growth                                169.14      93.47          27.65
 Interest                  12.46          75.20     141.01         191.40
 Profit before Tax        144.85         412.84     865.07        1055.34
 % Growth                                185.02     109.54          21.99
 Taxation                  38.38         103.21     294.12         358.81
 Net Profit               106.46         292.97     521.72         636.47
 % Change YoY                            175.19      78.08          21.99



Ratio Analysis

 (Year-end March)              FY06        FY07     FY08E            FY09E
 EPS                           10.76       15.86     28.25            34.46
 Book Value                   109.25      253.89    107.44           141.90     ROCE is higher due to
 Net Profit Margin (%)         12.92       10.76      21.9            22.24     higher operating margins
 RONW                          52.93       20.03     26.29            24.28     on the relatively lesser
 ROCE                          37.34       20.30     34.18            32.65
                                                                                capital
 Enterprise Value                  NA    6792.94   6349.65          7024.78
 EV/EBIDTA                         NA      11.22      5.47             4.72
 Sales to Equity                   NA      14.74     18.55            28.75
 Market Cap                              5781.11   5781.11          5781.11
 Market Cap to sales               NA       2.12      1.69             1.09
 Price to Book Value               NA       1.23      2.91             2.21
 PE                                NA      20.55     11.54             9.46




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RATING RATIONALE
ICICIdirect endeavors to provide objective opinions and recommendations. ICICIdirect assigns ratings to its
stocks according to their notional target price vs current market price and then categorises them as
Outperformer, Performer, Hold, and Underperformer. The performance horizon is 2 years unless specified and
the notional target price is defined as the analysts' valuation for a stock.


Outperformer: 20% or more;
Performer: Between 10% and 20%;
Hold: +10% return;
Underperformer: -10% or more.




 Harendra Kumar                           Head - Research & Advisory                        harendra.kumar@icicidirect.com

                                          ICICIdirect Research Desk,
                                          ICICI Securities Limited,
                                          2nd Floor, Stanrose House,
                                          Appasaheb Marathe Marg,
                                          Prabhadevi, Mumbai – 400 025

                                          research@icicidirect.com




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without prior written consent of ICICI Securities Ltd (I-Sec). The author of the report does not hold any investment in any of the
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date of release of this report. This report is based on information obtained from public sources and sources believed to be reliable, but
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