>PARSVNATH DEVELOPERS: Execution to pick up (EDELWEISS)

■ Deliveries behind schedule: PDL has disappointed on its delivery target in FY10, delivering ~1.8msf against the target of ~5.1msf. Of the ~1.83msf delivered, ~87% has been delivery of plots. In terms of new sales in FY10, PDL has sold 2,371 units in FY10 comprising an area of 5.33msf against our expectations of 7.4msf.

■ However, sales momentum and improved execution to drive revenues
In FY10, PDL launched 7 new projects across 3.89msf - key projects being La Tropicana, Delhi (1.97msf), Elite Floors, Dharuhera (0.7msf) and Parsvnath Technica IT Park, Gurgaon (0.7msf). Execution on these and certain other projects (Palacia – Gr. Noida, Privilege – Gr. Noida, Exotica – Ghaziabad and Gurgaon are expected to drive revenues for FY10-FY12E at a CAGR of 32%.

■ Net debt to ~halve to INR 9.8bn by FY12E as compared to peak
PDL’s net debt had increased from INR 6.2bn in FY07 to INR 18.2bn (net D/E: 0.92x) in Q3FY09. However, post a QIP of INR 1.7bn and asset monetization (INR 3.35bn) net debt has reduced to INR 15bn in FY10 (net D/E: 0.66x). We expect the net debt to reduce further to ~INR9.8bn in FY12E (net D/E: 0.4x) through operating cash flows.

■ Asset monetization/stake dilution in FY10 a key positive
PDL has been aggressively monetizing its’ non-core land assets, by way of sale / return of land to developers/government agencies. During FY10, PDL has monetized INR 3.35bn, of which the company has received INR 2.07bn with balance money of INR 1.28bn receivable in FY11E.

■ Outlook and valuations: Execution to pick up, Maintain ‘BUY’:
We value PDL based on SOTP valuation. We have valued PDL’s real estate business on a DCF basis for its’ land bank of 97 mn sq ft and its’ DMRC rental assets of 2.52 mn sq ft at an average rental of INR 90 per sq ft and a cap rate of 12%. PDL’s 6 hotel projects have been valued at an EV of INR 3.4 bn. Adjusting for balance sheet items, we estimate the fair value of PDL at INR 151 / share or 1x FY11E P/BV. We maintain a ‘BUY’ and rate it ‘Sector Performer’ on a
relative return basis.

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