>Indiabulls Real Estate Limited (GOLDMAN SACHS)

What's changed
Indiabulls Real Estate’s FY10 results provided an update on progress with construction activity. This was encouraging in our view as it indicated that IBREL has about 9 mn sq ft under construction in cities including Ahmedabad, Chennai, Gurgaon, Hyderabad, Madurai and Mumbai (Panvel). It plans to complete a significant proportion of these projects and recognize about Rs10.25 bn of revenue in FY11.

Implications
We upgrade revenue/EPS forecasts for FY11E-FY12E as we expect P&L revenue recognition based on percentage completion to be faster than what we had previously anticipated. We raise EPS by 62% to Rs6.91 (from Rs4.26) for FY11E and by 22% to Rs10.85 (from Rs8.92) for FY12E. Although we raise EPS, our 12-month target price is unchanged at Rs214 reflecting a lower than expected FY10-end net cash position. While visibility on IBREL’s earnings may not be as high as some of its peers given the nascent stage of projects, we believe the market may get better evidence of improving execution over the next 12 months, which could help the stock re-rate. We maintain our Buy rating. We have updated our FY10 numbers for the preliminary information released by the company in its press release. We also introduce FY13 estimates.

Valuation
Our target price is set at a 30% discount to FY11E RNAV, which is at the deeper end of the 10%-30% discount range we use for our coverage. IBREL currently trades at close to a 45% discount to FY11E RNAV.

Key risks
Downside risks to our view include limited signs of improvement in the pace of residential sales and office leasing, execution delays with real estate and power and low earnings visibility, aside from policy tightening.

To read the full report: INDIABULLS REAL ESTATE