Sunteck Realty Limited — Q1 FY25 earnings call

Call held 16 Aug 2024

Management summary

Sunteck Realty reported a strong start to FY25, driven by robust pre-sales and significant revenue growth from project completions. The company's balance sheet remains healthy with a net cash positive status. Strategic expansion into luxury markets like Dubai and Nepean Sea Road, coupled with a strong launch pipeline for existing projects, positions Sunteck for sustained growth, with management confident in achieving 30-35% pre-sales growth for FY25 and beyond.

Highlights

  • Pre-sales in Q1 FY25 reached ₹502 crores, marking a 30% year-on-year growth.

  • Operating cash flow surplus grew by 32% year-on-year to ₹100 crores.

  • Operating revenue (P&L) surged by 348% year-on-year to ₹316 crores.

  • Net profit for Q1 FY25 stood at ₹23 crores.

  • The company maintains a net cash positive position with a net debt-to-equity of minus 0.01x and a cash surplus of ₹39 crores.

  • Total Gross Development Value (GDV), excluding pre-sales, is ₹37,480 crores.

  • The Dubai project has a potential of ₹9,000 crores in sales with an investment of ₹250 crores for a 50% profit share.

  • The Nepean Sea Road project holds a potential GDV of ₹2,500 crores.

Key financials

  1. Pre-sales Value ₹502 Cr +30%YoY
  2. Collections ₹342 Cr +19%YoY
  3. Operating Cash Flow Surplus ₹100 Cr +32%YoY
  4. Operating Revenue (P&L) ₹316 Cr +348%YoY
  5. Net Profit ₹23 Cr
  6. Reported EBITDA Margin 40%
  7. Net Debt-to-Equity -0.01×
  8. Total GDV (excl. pre-sales) ₹37,480 Cr

What they filed

Q1 FY27: revenue up 2.1%, net profit up 27.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue169 162 206 188 252 +49%344 +112%339 +65%192 +2%
EBITDA37 48 69 48 78 +111%81 +69%97 +41%67 +40%
Net profit35 43 50 33 49 +40%57 +33%63 +26%42 +27%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Pre-sales

  • Pre-sales growth Pre-sales · FY '25 · High confidence 30% to 35%
    With a strong start to this financial year, we remain confident to achieve 30% to 35% growth in pre-sales for FY '25, as we had guided at the beginning of the year.

    — Kamal Khetan, Chairman and Managing Director

  • Pre-sales growth Pre-sales · FY '26 and FY '27 (continuous basis) · Medium confidence 30% to 35%
    Riddhi, on a continuous basis, we are looking at 30% to 35% growth year-on-year.

    — Prashant Chaubey, Chief Financial Officer

Operating Cash Flow

  • Operating cash flow surplus growth Operating Cash Flow · FY '25 · High confidence stronger growth
    With the higher sales in BKC, two big project completion in FY '25, and higher pre-sales, I am confident Sunteck will deliver a stronger operating cash flow surplus growth in FY '25.

    — Kamal Khetan, Chairman and Managing Director

Launch Pipeline

  • Combined GDV value of planned launches Launch Pipeline · FY '25 · High confidence Rs. 5,000 crores
    The combined launches of the Sunteck for this year what we are planning is close to the GDV value of Rs. 5,000 crores...

    — Kamal Khetan, Chairman and Managing Director

Total GDV

  • Total GDV value Total GDV · over next two to three years · High confidence Rs. 60,000 crores
    ...we are also talking about that right now our GDV value is Rs. 30,000 crores, which we are saying that we will continue to add and we will make it to Rs. 60,000 crores over a period of next two to three years.

    — Kamal Khetan, Chairman and Managing Director

Dubai Project Launch

  • Launch timeline Dubai Project Launch · FY '26 · High confidence next 12 to 15 months
    Our project in Dubai is likely to be launched in the next 12 to 15 months in FY '26.

    — Kamal Khetan, Chairman and Managing Director

Nepean Sea Road Project Launch

  • Launch timeline Nepean Sea Road Project Launch · Q4 FY25 / Q1 FY26 · High confidence Q4 of FY '25 or Q1 of FY '26
    As far as launch timeline, I have already mentioned in my last quarter call that we should be looking to launch this in either Q4 of FY '25 or Q1 of FY '26.

    — Kamal Khetan, Chairman and Managing Director

Risks & concerns

Areas of evasion (2)

  • Specific details on new business development projects (GDV, location)
  • Borivali project launch timeline until approvals are secured

Q&A highlights

3 direct
Broad economics and timeline of the Dubai project Direct
So, this project is in 100% subsidiary of Sunteck. We have invested close to approximately just Rs. 250 crores, so it is a quite asset-light model... The project is around Rs. 2,000 crores... So Rs. 9,000 crores GDV, Rs. 2,000 crores construction cost. And from that, we should look at your share at 50%... time to complete should be three to four years.

Provides crucial financial details, investment structure, and timeline for a major new international luxury project, highlighting its significant future revenue potential and asset-light strategy.

Asked by Puneet Gulati (HSBC)

Unsold inventory and launch pipeline for FY25 Direct
So, the launch pipeline, we have lined up a few launches in the obviously the coming quarter. The combined launches of the Sunteck for this year what we are planning is close to the GDV value of Rs. 5,000 crores... In our ready-to-move-in project in BKC, our unsold inventory is close to Rs. 1,200 crores. And in our ongoing projects, the unsold inventory is close to around Rs. 1,600 crores to Rs. 1,700 crores.

Offers a clear picture of immediate future growth drivers through the launch pipeline and current inventory levels, which are critical indicators for real estate developers.

Asked by Abhinav Sinha (Jefferies Group)

Sustainability of BKC sales momentum and strategy Direct
So, if you see in BKC in the last 12 months, we have done a pre-sales of close to Rs. 355 crores, and this is against Rs. 203 crores that we did in previous three financial years all put together. So overall, the momentum has definitely picked up in BKC by quite a margin, and we are quite confident that this will continue, and it will keep on continuing.

Addresses concerns about the lumpy nature of high-value sales and confirms management's confidence in the sustained performance of a key luxury project, which is a significant contributor to cash flow.

Asked by Ronald Siyoni (Sharekhan Limited)

3 min read 7 chapters

Detailed narrative

Strong Q1 FY25 Performance Driven by Pre-Sales and Collections

Sunteck Realty commenced FY25 with robust financial results, reporting pre-sales of ₹502 crores, marking a significant 30% year-on-year growth. Collections for the quarter also saw a healthy increase of 19% year-on-year, reaching ₹342 crores. This strong operational performance translated into a net operating cash flow surplus of ₹100 crores, a 32% increase compared to the previous year's first quarter, demonstrating effective cash flow management.

Significant Revenue Growth and Improved Profitability

The company's operating revenue in the P&L surged by an impressive 348% year-on-year to ₹316 crores for the quarter ended June '24, primarily due to revenue recognition from projects like Sunteck Maxxworld, Naigaon, and BKC. Despite a one-time charge related to FSI amortization, the reported EBITDA margin stood at approximately 40%, with an adjusted core EBITDA margin of close to 50%, reflecting strong underlying profitability. Net profit for the quarter was ₹23 crores.

Robust Balance Sheet and Prudent Debt Management

Sunteck Realty maintains a strong financial position, operating as a net cash positive company with a cash surplus of ₹39 crores, resulting in a net debt-to-equity ratio of minus 0.01x. Gross debt has been significantly reduced by over 60% since FY22, now standing at less than one quarter of cash collection, underscoring prudent financial management. The total Gross Development Value (GDV), excluding pre-sales already done, is substantial at ₹37,480 crores, providing a strong base for future growth.

Strategic Expansion into Luxury Markets: Dubai and Nepean Sea Road

The company is aggressively expanding its luxury portfolio with two major projects. The Dubai project, a 100% subsidiary, involves an investment of approximately ₹250 crores for a 50% profit share, with a potential to generate over ₹9,000 crores in sales. This asset-light model project, located near Burj Khalifa, is expected to launch in FY26. Similarly, the Nepean Sea Road project in South Mumbai, offering uninterrupted sea views, has a potential GDV of ₹2,500 crores and is slated for launch in Q4 FY25 or Q1 FY26.

Aggressive Launch Pipeline and Inventory Management

Sunteck has outlined a strong launch pipeline for FY25 with a combined GDV value of close to ₹5,000 crores, including new phases in Sunteck World (Naigaon), Sunteck Skypark (Mira Road), 5th Avenue (ODC Goregaon West), and new towers in Sunteck Beach Residences and Sunteck Crescent Park (Kalyan). Unsold inventory in ready-to-move-in BKC projects stands at ₹1,200 crores, while ongoing projects have ₹1,600-1,700 crores of unsold inventory, with ₹1,300-1,400 crores of costs yet to be incurred, indicating healthy sales potential from existing stock.

Confident Outlook for Sustained Pre-Sales Growth

Management expressed high confidence in achieving 30% to 35% pre-sales growth for FY25, driven by the existing project pipeline. This growth trajectory is expected to continue into FY26 and FY27. The company aims to increase its total GDV from the current ₹30,000 crores to ₹60,000 crores over the next two to three years, supported by new acquisitions and the significant additions from the Dubai project (₹9,000 crores GDV) which has already pushed the total GDV to nearly ₹40,000 crores.

Strong Momentum in BKC Sales

The BKC project has shown significant sales momentum, with pre-sales of approximately ₹355 crores in the last 12 months, a substantial increase compared to ₹203 crores over the previous three financial years combined. Management is confident that this accelerated sales performance in BKC will continue, contributing positively to operating cash flows. This sustained performance in a key luxury segment highlights strong demand and effective sales strategies.

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