>UNITECH (MOTILAL OSWAL)

■ Results boosted by other income: Unitech’s 4QFY09 revenues were down 66% YoY to Rs3.9b (v/s our estimate of Rs4.4b) and reported net profit was down 25% YoY to Rs2.7b (v/s our estimate of Rs696m). The results were boosted by (i) sharp jump in other income, which was Rs3.6b as against Rs115m in 4QFY08 and Rs587m in 9MFY09, and (ii) tax write-back of Rs20m.

■ Successful balance sheet recapitalization has reduced leverage: Unitech has raised ~US$575m (~Rs27b), by issuing fresh 342m shares, resulting in dilution of 16.7% pre dilution. As a result, promoter holding in Unitech would decline to ~44% v/s ~51% earlier. Unitech’s net Debt/ Equity would also decline from ~1x (pre second QIP) to ~0.4x now. Unitech has in the last few months managed to successfully recapitalize its balance sheet by 1) successfully
raising equity and ii) asset sale of ~Rs10b. This has significantly lowered the solvency risk and improved its financials.

■ Accelerated launches since March 2009: After a gap of 6-8 months, Unitech made a slew of residential launches, largely in the affordable housing segment. Since March 2009, it has launched ~14msf of residential projects in Gurgaon, Chennai, Mohali, Kolkata and Mumbai, and has sold ~3.2msf. The company plans to launch ~30msf of new projects, largely in the affordable housing vertical, and is confident of selling ~20msf in FY10 itself.

■ Valuation and view: We have upgraded our NAV estimate to Rs83/share from Rs66/share, to account for (i) accelerated launch of projects, ii) reduction of WACC and cap rates, and (ii) 5% CAGR in real estate prices vs zero increase earlier. The stock trades at 1.9x FY11E adjusted BV of Rs44/sh and at 1x its FY11E NAV of Rs83/share. While the macro outlook has turned positive for Unitech, we believe the stock is fairly valued. Maintain Neutral.

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