India Equity Institutional Research I Real Estate

Result Update

Unitech Ltd.
Rising input cost hampers margins!

INR: 35
HOLD Price Outlook : Rs 39 Market Data
Shares outs (Cr) Equity Cap (Rs. Cr) Mkt Cap (Rs. Cr) 52 Wk H/L (Rs.) Avg Vol (1yr avg) Face Value (Rs.) Bloomberg Code May 31, 2011 238.9 477.8 7,884 98.5/32.4 36,290,944 2.0 UT IN

Revenues growth marginally Unitechs consolidated revenue stood at Rs. 1,054 crore in Q4FY11, against of Rs. 660 crore i.e. 60% growth QoQ, while 4.8% decline YoY. The company booked ~2 msf in Q4FY11 against 2.2 msf in Q3FY11 (i.e. 10% de-growth QoQ). Average realizations for residential projects in Q4FY11 stood at Rs. 4,341 psf against Rs. 4,656 psf in Q3FY11; while average realization improved 8% over the last 3 quarters. Unitechs revenue for the year FY11 was Rs. 3,187 crore against Rs. 2,931 crore in FY10 which is 8.7% growth YoY. The company booked about 9.2 msf of sales for FY11 missing its guidance of 10 msf. Profitability dips due to increase in operating expense Companys consolidated EBIDTA stood at Rs. 169 crore in Q4FY11 against Rs. 209 crore in Q3FY11, decline of 19.3% QoQ and 32% decline YoY. This was primarily due to increase in construction cost which was Rs. 841 crore in Q4FY11 against Rs. 432 in Q3FY11 and Rs. 829 crore in Q4FY10. Employee cost too increased to Rs. 45 crore in Q4FY11 against Rs. 29 crore in Q3FY11 and Rs. 26 crore in Q4FY10. Rise in input cost hampered the EBITDA margins significantly, EBITDA margin in Q4FY11 was 16% against 31.6% in Q3FY11 and 22.4% in same period previous fiscal. Rising input cost is a cause of concern going forward which will put pressure on the margins in the coming fiscal. Other income increased significantly to Rs. 42 crore in Q4FY11 against Rs. 18 crore in Q3FY11. The net profit was Rs. 103 crore in Q4FY11 against Rs. 111 crore in Q3FY11 i.e. 8% decline sequentially. Net profit margins were almost half at 9.7% in Q4FY11 against 17% in Q3FY11. EBITDA for FY11 was Rs. 924 crore against Rs. 1,071 crore in FY10 i.e. 14% decline YoY. EBITDA margins de-grew 755 bps QoQ to 29% in FY11. Net profit in FY11 stood at Rs. 567.6 crore against Rs. 675 crore in FY10 which 16% decline on yearly basis. Projects details Of the total sales in Q4FY11 the company sold 49% in Gurgaon, 19% in Noida & Greater Noida, 11% in Chennai, 10% in Kolkata and remaining 10% in other cities. On the delivery front Unitech delivered 1.3 msf in Q4FY11. Unitech launched 10.44 msf in Q4FY11 it included 3.9 (37%) msf in Gurgaon, 2.15 msf (21%) in Noida & Greater Noida, 1.37 msf (13%) in Chennai, 1.33 msf (13%) in Kolkata and 1.74 msf (17%) in other cities of the country. On the leasing front the company leased 4 msf in February 2011 as against 3.26 msf in June 2010. Our View We expect Unitech to remain aggressive in its launches in the affordable and mid housing segment. The company will continue its focus on reducing its debt and also raise funds for ongoing projects, the debt levels are expected to drop further going ahead with improved cash flows. We recommend HOLD on the stock with target price of Rs. 39 per share by assign P/BV multiple of 1.3x to its FY13 P/BV of Rs. 29.7 per share. (BV discount to peers on the back of ongoing controversy of Uninor in the 2G scam). Key Financials Particulars Revenues EBITDA EBITDA Margin (%) Net Profit Net Profit Margin (%) EPS
Source: Company data, KRChoksey Research

Market Info:
SENSEX NIFTY 18,233 5,473

Market data as on May 30, 2011

Price Performance
160 140 120 100 80 60 40 20 0 Sep-10 Dec-10 Feb-11 Jun-10 Aug-10 Nov-10 Mar-11 Oct-10 Apr-11 Jul-10 May-10 May-11 Jan-11

Unitech Ltd.

Sensex

Share Holding pattern (%)

Particulars

Mar-11 48.6 31.7 2.9 16.8 100.0

Dec-10 48.6 34.2 1.9 15.3 100.0

Change

Promoter FII DII Others Total Source: BSE Analysts : Niyati Jhaveri

0.0 (2.5) 1.0 1.5

niyati.jhaveri@krchoksey.com 91-22-6696 5570 Kunal Dalal kunal.dalal@krchoksey.com 91-22-6696 5574

(Rs. crore) FY10 2,931.3 1,071.2 36.5% 675.1 23.0% 2.6 FY11 3,187.1 923.9 29.0% 567.6 17.8% 2.2 FY12E 3,505.8 876.4 25.0% 615.2 17.5% 2.4 FY13E 4,031.7 1,007.9 25.0% 719.8 17.9% 2.8

www.krchoksey.com 91-22-6696 5555 91-22-6691 9569

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Unitech Ltd.

Financial Overview Revenue trend Q-o-Q

1,200 1,000 1,132 829
In Rs. crores

Profitability trend Q-o-Q

1,054
350 300
273 294 253 209 163 180 174 111 169 103

In Rs. crores

800 600 400 200 0 Q4FY10 Q1FY11

645

660

250 200 150 100 50 0

Q2FY11

Q3FY11

Q4FY11

Q4FY10

Q1FY11 EBITDA

Q2FY11

Q3FY11

Q4FY11

Net Profit

Profit margins Q-o-Q

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 39% 35% 32% 24% 22% 14% 27% 17% 16% 10%

Q4FY10

Q1FY11

Q2FY11

Q3FY11

Q4FY11

EBITDA Margins
Source: Company data, KR Choksey Research

Net Pro fit Margins

KRChoksey Equity Research

Unitech Ltd.

Financials Q4FY11 Result Particulars Q4FY11 Q3FY11 Q4FY10 Q-o-Q Y-o-Y

(Rs. Crore) Comments Unitech booked sales of ~2 msf in Q4FY11 v/s 2.2 msf in Q3FY11 Construction cost had almost doubled in the Q4FY11 dampening the margins for the quarter

Revenues (Increase)/Decrease in stock-in-trade

1054 0

660 10

1107 (5)

59.8% -98.1%

-4.8% -104.4%

Real estate, Construction and other expenditure Employee Cost Total Operating expenses

(841) (45) (886)

(432) (29) (451)

(829) (26) (860)

94.7% 52.2% 96.4%

1.5% 69.3% 3.0%

EBITDA EBITDA Margin (%) Depreciation EBIT EBIT Margin (%)

169 16.0% (7) 162 15.3%

209 31.6% (8) 201 30.5%

248 22.4% (11) 237 21.4%

-19.3% -1565 bps -11.0% -19.6% -1515 bps

-31.9% -637 bps -36.8% -31.7% -605 bps

Company booked ~9 msf for FY11 missing its target of 10 msf for the same period

Interest Other Income PBT Taxes

Profit after tax before minority interest

(34) 42 170 (57) 113 (9) 103 9.7%

(34) 18 185 (74) 111 (1) 111 16.9%

(32) 45 249 (70) 180 (0) 163 14.8%

-1.5% 129.4% -8.3% -23.5% 1.8% 1146.5% -7.9% -715 bps

3.7% -7.1% -31.9% -18.9% -36.9% 2112.5% -37.3% -504 bps

Interest expense declined modestly on sequential basis

Minority Interest Net Profit Net Profit Margin (%)

Source: Company, KR Choksey Research

KRChoksey Equity Research

Unitech Ltd.

Financials Particulars Revenues Operating expenses EBITDA EBITDA Margin Depreciation EBIT EBIT Margin Interest Other Income PBT Taxes PAT Minority Interest Net Profit Net Profit Margin
Source: Company, KR Choksey Research

(Rs. crore) FY09 2,889.7 (1,301.0) 1,588.8 55.0% (20.9) 1,567.9 54.3% (554.6) 425.9 1439.2 (242.4) 1,196.8 2.1 1,197.7 41.4% FY10 2,931.3 (1,860.2) 1,071.2 36.5% (34.1) 1,037.0 35.4% (200.0) 84.0 921.0 (226.4) 694.6 (3.1) 675.1 23.0% FY11 3,187.1 (2,263.2) 923.9 29.0% (31.9) 892.0 28.0% (145.5) 105.0 851.6 (270.4) 581.2 (10.4) 567.6 17.8% FY12E 3,505.8 (2,629.3) 876.4 25.0% (35.1) 841.4 24.0% (120.0) 133.1 854.5 (239.2) 615.2 0.0 615.2 17.5% FY13E 4,031.7 (3,023.8) 1,007.9 25.0% (40.3) 967.6 24.0% (105.0) 151.2 1013.8 (294.0) 719.8 0.0 719.8 17.9%

KRChoksey Equity Research

Unitech Ltd.

Rajiv Choksey Anuj Choksey Naveen Fernandes Kunal Dalal

Co-Head Institutional Equities Co-Head Institutional Equities

Head-Institutional Broking

rajiv.choksey@krchoksey.com anuj.choksey@krchoksey.com
naveen.fernandes@krchoksey.com

+91-22-6653 5135 +91-22-6696 5500

+91-22-6696 5554

Research Head

kunal.dalal@krchoksey.com

+91-22-6696 5574

Unitech Ltd.
CMP (Rs) TP (Rs)

Rating Legend Recommendation HOLD Under Review Reduce Nil 5% Less than 0% HOLD Our Rating Buy Hold Upside More than 15% 5% - 15%

26-May-11 15-Feb-11 19-Nov-10

35

39

35

71

81

Sell

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