Puravankara Projects, the real estate player (primarily residential projects), which recently entered the capital market, has reported its first-ever performance (post listing on August 30). The company is present in southern cities like Chennai, Kochi, Hyderabad, Mysore and Coimbatore.
Revenues at Rs 120.40 crore reflect a growth of 28.5% for the quarter ended June 2007 (Q1). Operating profits were up 32% at Rs 40 crore, translating into a margin of 33.3%, up from 32.2% in the corresponding quarter the previous year.
Profit after tax at Rs 44 crore, though, was up 69%, mainly due to an increase in the share of profits from associate companies and an 18% decline in tax outgo.
Project-based income as well as rental income contributed to the topline growth, although the latter contributes a very small (under 1%) amount to revenues at present.
On the expenditure side, although the total costs have risen slower than revenue growth, some issues merit attention. The staff costs, especially on the construction and marketing side, have increased nearly five-fold during the quarter.
The company seems to be spending heavily on sales as the commission and incentive charges grew by 145% and the brokerage and referral charges increased 6 times. This could also be an indication of the increasing competition in this space. Also, the cost of land has risen much faster than revenue growth.
Meanwhile, the stock continues to quote below its offer price of Rs 400, which is not surprising considering the issue was over-priced even after the company lowered the original price band.
The stock ended 3.93% higher at Rs 392.45 on a day when the BSE Sensex was up about 1%. The gains can also be partly attributed to the positive sentiment towards interest rate sensitive sectors like auto, realty and banking.
Going forward, the company’s development plans are 80% in the residential space and the rest in the commercial space. As the latter grows, the company’s performance can be expected to improve further considering the segment enjoys better returns.
Another advantage for Puravankara is that it commands a premium on its projects. It also holds good quality land bank with clear titles. Currently, it has 14 million square feet of the developable area (out of a total 116 million square feet) under implementation. There’s a flipside, too — the company has a geographical concentration as 74% of the land holding is in Bangalore and many new players are entering here.
Like most other real estate players, then, the valuation driver remains the execution capability, besides macro factors like interest rates and economic growth. Considering the company’s positioning as a premium player and its decent track record, it may not be a bad bet at declines.
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