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Unitech Quarterly Results

Last updated: May 13 2015
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  • #21

    #21

    Re : Unitech Quarterly Results

    DLF vs Unitech

    COSTS HIT MARGINS
    The spike in raw material costs (bricks, sand, cement and steel) in the second half of 2010-11 dented operating profit margins. The DLF management indicated costs of cement, steel and labour had risen 10-30 per cent in the past two quarters, forcing the company to take a one-time cost hit of Rs 475 crore. While operating profit margins for DLF tanked by half to 25 per cent due to this, analysts estimate the high raw material cost shaved 810 bps off Unitech’s margins for the March quarter. Unitech has not reported the March quarter numbers separately.

    Going ahead, DLF has indicated a large part of the price inflation was factored in its current projects but wage inflation could account for a one to two percentage point increase in costs. DLF is likely to focus on plotted sales, where the cost to sales ratio is much less than high-rise constructions. The company expects this strategy to help it regain margins of 45 per cent from the March quarter’s sub-30 per cent.

    DEBT NEEDS
    A key monitorable for the two companies will be debt. While debt in the case of Unitech looks more manageable, with a debt to equity ratio of 0.46, it increased for DLF during 2010-11 by Rs 1,800 crore due to investments in land and in its rental business. Unlike Unitech, reducing its net debt of Rs 21,424 crore has become a priority for DLF. In a investor conference call, Saurabh Chawla, executive director, finance, said it intends to do this by strengthening operational cash flows, enhancing the pace of non-core divestments and moderating investments in land aggregation and capital expenditure. The company has more than doubled its divestment target from Rs 4,500 crore to Rs 10,000 crore over the next two to three years. This is likely to bring its debt to equity levels from the current 0.8 to more manageable levels.

    Meanwhile, given the macro environment, muted volume growth and higher costs, analysts expect the working capital (day-to-day) funding needs of the companies to rise. This, in a rising interest rate cycle, will increase interest expenses and impact their net profit margins. Though, some comfort can be drawn from inflow of cash from their rental businesses.

    DIVERGENT STRATEGIES
    Though both DLF and Unitech are pan-India players, with a presence across various realty verticals, they will be focusing on different segments to improve their financials.

    While Unitech’s managing director, Ajay Chandra, has indicated the company’s focus will be in the mid-income and affordable housing segments, DLF’s Chawla says his company will look at high-margin projects such as luxury homes and plotted developments. DLF says it will continue with a strategy of volume moderation in high construction cost and low margin (large) projects. The company believes high inflation will lead to a fall in margins in mid-range residential complexes.

    While Unitech will be focusing on rapid launch and affordable housing projects, it is aiming to achieve sales booking of Rs 5,000 crore for 2011-12, as compared to Rs 4,323 crore in 2010-11. Analysts estimate this to translate into sales booking of 10 million sq ft in 2011-12, but say revenue growth will depend on implementation (of projects under construction) and average prices.

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    • #22

      #22

      Re : Unitech Quarterly Results

      PINC Research is bullish on Unitech and has recommended buy rating on the stock with a target of Rs 55 in its May 31, 2011 research reports.
      “Unitech, Q4FY11 revenues, at ~Rs10.5bn, were 40% higher than our estimate. However, the company’s operating and net level performance during the quarter was disappointing – the EBITDA margin for Q4FY11 dropped to 16% vs 32% in Q4FY10 and averaged 29% in FY11. While we expect the cost overruns to spill over to the next year, margins seem to have bottomed out at current levels and should start improving QoQ as the revenue share of older projects begin to reduce. Key drivers to watch out for Unitech going forward are: 1) Focus on core business with sustained momentum in launches and absorption to keep the cash inflow intact. (2) Focus on reducing the debt level further - company has already reduced net debt by Rs2.3bn in FY11. (3) Approval of court decision for listing of Unitech Infra as it’s been almost a year since the process was initiated.”
      [COLOR="rgb(0, 100, 0)"]“The company has registered revenue of Rs10.5bn in Q4FY11, 60% higher sequentially which signifies that execution is in full swing.[/COLOR] The company in FY11 sold 92 msf as against 16.6 msf in FY10 which is as per our expectation. Going ahead also we expect 9.6 msf and 10.4 msf of sales in FY12 and FY13e respectively. (See table on Pg 2) We believe that cost overruns will impact margins over the next 2 quarters. Margins should start improving as revenue contribution of old projects decline. We lower our EBITDA margin estimates for FY12E by 280bps and for FY13 by 540bps to reflect 1) Impact of cost overruns for past projects, and 2) High construction costs for new projects. Hence, we lower the FY12/13E EPS estimates by 8/15% respectively.”
      “We maintain ‘BUY’ with target price of Rs55 post 20% discount to NAV. We believe Unitech Infra listing and new launches from the company are likely to be key triggers going ahead,” says PINC Research report.
      FIIs holding more than 30% in Indian cos

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      • #23

        #23

        Re : Unitech Quarterly Results

        holding to my Rs 31 shares

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        • #24

          #24

          Re : Unitech Quarterly Results

          Hi all,

          Please note that there is already a thread running on Unitech developers here https://www.indianrealestateforum.co...urgaon?t=36559
          We prefer not to have parallel threads running on the same topic as this dilutes the information shared. Request you all to repost your comments on the above posted link.

          Thank you
          Let's Talk REAL on IREF

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