>UNITECH (GOLDMAN SACHS)

Sales momentum robust; raise target price, reiterate Conviction Buy

Source of opportunity
Unitech reported FY2009 EPS about 20% ahead of our estimate and Bloomberg consensus. More importantly, trends since March have been upbeat with sales of 3.5-4.0 mn sq ft in 1QFY2010, which is more than what Unitech sold in all of FY2009. Accordingly, we increase our area sold forecast to 14 mn sq ft pa on average in FY10E-FY14E versus our earlier projection of 11 mn sq ft pa. We assume 14 mn sq ft of area sold in FY10E versus over 8 mn sq ft previously. We raise our target price to Rs95 from Rs88 and maintain our Buy rating (on Conviction List).

Catalyst
Unitech is looking to launch 30 mn sq ft of projects and get bookings for about 20 mn sq ft in FY2010. Although 1Q trends are reassuring, our forecasts are conservative vs. guidance, tempered by taking into context the area sold during the previous upcycle, which was about 10 mn sq ft pa in FY06-FY07. With plans to launch in 15 cities in FY10E, we believe news flow on project launches over the next three quarters could drive the stock higher. We also see Unitech’s debt burden reducing over the next three quarters, which we believe would be reassuring.

Valuation
We raise our 12-m TP to Rs95 (a 20% discount to FY11E RNAV), and revise our EPS forecasts by +18% for FY10E, +18% for FY11E and -8% for FY12E, reflecting revised development pipeline forecasts and optionality of any additional asset disposals. We believe the stock price reflects about a 12% decline in property prices across the board in FY10E, which seems pessimistic given Unitech’s recent launches at lower ticket sizes.

Key risks
Any signs that 1QFY10 sales trends might not be sustained and if we see cancellations on recent bookings; execution delays.

To see full report: UNITECH