Deutsche Bank puts 'sell' rating on Puravankara Projects
Deutsche Bank has initiated coverage on Puravankara Projects with a ‘sell’ rating.
Puravankara Projects
RESEARCH: DEUTSCHE BANK
RATING: SELL
CMP: Rs 203
Deutsche Bank has initiated coverage on Puravankara Projects with a ���sell��� rating. Its asset-light business model, strong balance sheet and good financial disclosures make Puravankara an excellent developer . However, high floor space index (FSI) on its landbank, coupled with over-concentration in the residential vertical and in Bangalore, are threats in the current environment of weakening demand and tight financial markets.
Given its net worth, Puravankara has an asset-light model with a smaller land bank and at a lower cost (unlike peers). Furthermore, its land bank is largely paid for, implying less time and risk in securing clear land titles. The low gearing of 48% should enable it to replenish its land bank during cyclical slowdowns. Deutsche Bank believes that financials will be driven by scaling-up operations, coupled with moving up the value chain.
The high FSI (~ 3.1x vis-��-vis ~1.2x for peers) on its land bank in the current environment of strong headwind can make marketing a challenge. Though Puravankara has been around for nearly two decades, its completions to date are lower than its peers in Bangalore. Concentration in residential (~ 80% of land bank) and Bangalore (63%), which is seeing significant oversupply, are other concerns. The trading price of Rs 165 is at a 30% discount to discounted cash flow (DCF)-based NAV of Rs 236. With a 19% downside potential to the target price, Deutsche Bank recommends a ���sell��� rating.
RESEARCH: DEUTSCHE BANK
RATING: SELL
CMP: Rs 203
Deutsche Bank has initiated coverage on Puravankara Projects with a ���sell��� rating. Its asset-light business model, strong balance sheet and good financial disclosures make Puravankara an excellent developer . However, high floor space index (FSI) on its landbank, coupled with over-concentration in the residential vertical and in Bangalore, are threats in the current environment of weakening demand and tight financial markets.
Given its net worth, Puravankara has an asset-light model with a smaller land bank and at a lower cost (unlike peers). Furthermore, its land bank is largely paid for, implying less time and risk in securing clear land titles. The low gearing of 48% should enable it to replenish its land bank during cyclical slowdowns. Deutsche Bank believes that financials will be driven by scaling-up operations, coupled with moving up the value chain.
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The high FSI (~ 3.1x vis-��-vis ~1.2x for peers) on its land bank in the current environment of strong headwind can make marketing a challenge. Though Puravankara has been around for nearly two decades, its completions to date are lower than its peers in Bangalore. Concentration in residential (~ 80% of land bank) and Bangalore (63%), which is seeing significant oversupply, are other concerns. The trading price of Rs 165 is at a 30% discount to discounted cash flow (DCF)-based NAV of Rs 236. With a 19% downside potential to the target price, Deutsche Bank recommends a ���sell��� rating.
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