CMP 236.25

Target Price 274.00

ISIN: INE484J01027

MAY 26th

2014

GODREJ PROPERTIES LTD

Result Update (PARENT BASIS): Q4 FY14

BUYBUYBUYBUY

Index Details

Stock Data

Sector Realty

BSE Code 533150

Face Value 5.00

52wk. High / Low (Rs.) 270.34/153.90

Volume (2wk. Avg. Q.) 98000

Market Cap (Rs. in mn.) 47069.03

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 6640.05 8499.26 10199.12

EBITDA 2197.02 2696.92 3100.77

Net Profit 976.52 1192.97 1373.40

EPS 4.90 5.99 6.89

P/E 48.20 39.46 34.27

Shareholding Pattern (%)

1 Year Comparative Graph

GODREJ PROPERTIES LTD BSE SENSEX

SYNOPSIS

� Godrej Properties Limited (GPL) Established in

1990, a leading national real estate developer.

� Godrej Properties is currently developing

residential, commercial and township projects

spread across 9.3 million square meters in 12 cities

across India.

� The company’s Standalone net sales at Rs. 3575.09

million from Rs. 1501.91 million over the

corresponding quarter last year.

� During Q4 FY14, Net profit jumps to Rs. 409.25

million against Rs. 366.24 million in the

corresponding quarter of the previous year.

� During Fy14 Godrej Properties Ltd added 8 new

projects with Rs.13.42 mn sq.ft. of saleable area.

� Godrej Properties Limited received 9 awards in Q4

FY2014 and has received 28 awards in FY2014.

� Godrej Properties Ltd has added seventeenth

project in Mumbai with Rs. 0.8 million sq. ft.

Saleable area.

� The Company has recommended dividend of Rs. 2

per equity share of Rs. 5 each for the year ended

31st March 2014.

� During Q4 FY14, total booking value of Rs. 10660

million compared to Rs. 6010 million in Q4 FY2013

and total booking volume of 1.34 mn sq.ft.

� Net Sales and PAT of the company are expected to

grow at a CAGR of 34% and 4% over 2013 to 2016E

respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Godrej Properties Ltd 236.25 47069.03 4.90 48.20 2.63 40.00

Anant Raj 66.75 19697.7 0.88 75.85 0.51 20.00

Sobha Developers 439.75 43123.6 21.06 20.88 2.04 70.00

Sunteck Realty 338.80 21333.0 1.98 171.11 5.74 9.00

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q4 FY14,

Godrej Properties Ltd is currently developing

residential, commercial and township projects

spread across approximately 9.3 million square

meters in 12 cities across India has reported its

financial results for the quarter ended 31st Mar,

2014.

Months Mar-14 Mar-13 % Change

Net Sales 3575.09 1501.91 138.04

PAT 409.25 366.24 11.74

EPS 2.05 4.69 (56.23)

EBITDA 717.68 392.27 82.96

The company has achieved a turnover of Rs. 3575.09 million for the 4th quarter of the current year 2013-14 as

against Rs. 1501.91 millions in the corresponding quarter of the previous year. The company has reported net

profit of Rs. 409.25 million against Rs. 366.24 million reported respectively in the corresponding quarter of the

previous year. The company has reported an EPS of Rs. 2.05 for the 4th quarter as against an EPS of Rs. 4.69 in the

corresponding quarter of the previous year. Profit before interest, depreciation and tax is Rs. 717.68 millions as

against Rs. 392.27 millions in the corresponding period of the previous year.

Break up of Expenditure

Particulars

Rs. Millions

Q4 FY14 Q4 FY13

Cost of Sales 2965.28 889.88

Employee Benefit Expenses 77.94 46.59

Depreciation 14.24 9.85

Other Expenses 64.08 135.56

Latest Updates

� The Company has recommended dividend of Rs. 2 per equity share of Rs. 5 each for the year ended 31st March

2014.

� During the year the Company has sub-divided equity shares of face value Rs.10 each to equity shares of face

value Rs.5 each.

� During Fy14 Godrej Properties Ltd added 8 new projects with Rs.13.42 mn sq.ft. of saleable area.

� Godrej Properties Limited received 9 awards in Q4 FY2014 and has received 28 awards in FY2014.

� Pursuant to the scheme of Amalgamation, the amount of Rs.27600.50 lac arising out of the difference

between transferor Companies and Transferee Company has been adjusted from General Reserve Account

and surplus in statement of profit & Loss. Amalgamation expenses amounting Rs.25 Lac charged off to

statement of profit & Loss.

� During the quarter, the Employee Stock Grant Scheme, 2011, 240 stock grants have vested and have been

exercised.

� GPL, the real estate development arm of the Godrej Group, has added a new project in Sector 79, Gurgaon to

its development portfolio. The land parcel measures 17.4 acres and the project will be developed as a

premium residential housing project. The expected saleable area in the project is .15 million square meters.

Business Development Highlights:

� Added 4 projects in 4 separate cities with Rs.9.6 mn sq.ft. of saleable area in Q4 FY14.

Vikhroli, Mumbai

� Added GPL’s seventeenth project in Mumbai with Rs. 0.8 million sq. ft. Saleable area.

� DM Project -GPL’s economic interest is 10% of revenues.

Keshav Nagar, Pune

� Added GPL's fourth residential project in Pune with Rs. 2.8 mn sq.ft. Saleable area.

� GPL’s economic interest is 35% of profits.

� Close proximity to IT parks of Kharadi and Hadapsar.

Padur, Old Mahabalipuram Road, Chennai

� Added GPL's second project in Chennai with Rs.1 mn sq.ft. Saleable area.

� GPL's economic interest is 44.5% of profits

� Project will be developed as a modern group housing residential development.

Devanhalli, Bangalore

� Added GPL's seventh project in Bangalore with Rs. 5.00 mn sq.ft. Saleable area.

� GPL’s economic interest is 50% of profits.

� Project will be developed as an integrated township with a mix of residential units, school, convenience

retail and other amenities

New Project launched in FY 14.

GPL has Lunched Godrej Central, Chembur in Mumbai, Godrej Garden City, Ahmedabad, Godrej Platinum Alipore,

Godrej Horizon Pune, Godrej E City Bangalore and Godrej Prakriti in Kolkata.

Other projects which are on- track in FY 15

� Godrej City, Panvel, Mumbai.

� Sahakar Nagar 2 Redevelopment, Chembur in Mumbai.

� The Trees, Vikhroli Residential Phase 1 in Mumbai.

� Keshav Nagar, Pune

� Godrej Sky, Byculla, Mumbai

� Godrej Anandam Nagpur.

� Godrej Palm Grove Chennai.

� Godrej Garden City, Ahmedabad.

� Godrej Summit, Gurgaon.

� Godrej Platinum, Mumbai.

� Godrej Gold County, Bangalore.

� Godrej Prana, Pune.

� Godrej Central, Mumbai

Sales Highlights

� Highest ever sales in a single quarter Rs.10000 mn in quarterly sales for the first time in GPL’s history

� During Q4 FY14, total booking value of Rs. 10660 million compared to Rs. 6010 million in Q4 FY2013

and total booking volume of 1.34 mn sq.ft.

� Residential projects recorded booking value of Rs. 8350 million and booking volume of 0.90 million sq.ft.

� Commercial projects recorded booking value of Rs. 2310 million and booking volume of 0.44 million sq.ft.

COMPANY PROFILE

Godrej Properties Limited Established in 1990 and is headquartered in Mumbai, India, is the first real estate

company to have ISO certification. Godrej Group ranked as 2nd most trusted Indian brand in the 2013 Brand

Trust Report. The company was formerly known as Godrej Properties and Investments Limited and changed its

name to Godrej Properties Limited in November 2004. Godrej Properties brings the Godrej Group philosophy of

innovation and excellence to the real estate industry. Godrej Properties is currently developing residential,

commercial and township projects spread across 9.3 million square meters in 12 cities across India. To create

landmark structures, Godrej Properties collaborates with outstanding associates and reputed names. The

company aims to deliver superior value to all stakeholders through extraordinary and imaginative spaces

created out of deep customer focus and insight. Godrej Properties Limited is a subsidiary of Godrej Industries

Limited.

Over the last Few years, Godrej Properties has received over 60 awards and recognitions, including “Popular

Choice - Developer of the Year” award by ET NOW in 2013 and “Best Business Practice in Real Estate” for the

year 2012 by Accommodation Times.

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March31, 2013 -2016E at March31, 2012 - at March31-2015E

GODREJ PROPERTIES LTD FY13A FY14A FY15E FY16E

I EQUITY & LIABILITIES

A) Shareholder's Funds

a) Share Capital 780.46 991.23 991.23 991.23

b) Reserves and Surplus 12862.48 16910.31 18103.28 19476.68

Sub-Total Net worth 13642.94 17901.54 19094.51 20467.91

B) Non Current Liabilities

a) Long term borrowing 3460.92 2037.03 1588.89 1366.44

b) Other Long term liabilities 2.77 10.85 13.45 16.14

c) Long term Provisions 27.82 28.58 30.29 31.81

Sub-Total Non Current Liabilities 3491.51 2076.46 1632.63 1414.39

C) Current Liabilities

a) Short term borrowings 4256.15 13166.91 16326.96 18776.01

b) Trade payables 1088.10 1105.21 1149.41 1183.90

c) Other Current liabilities 4773.53 7019.34 8282.83 9359.59

d) Short term Provisions 420.13 477.42 525.17 567.18

Sub-Total Current Liabilities 10537.91 21768.88 26284.37 29886.68

TOTAL EQUITY & LIABILITIES (A+B+C) 27672.36 41746.89 47011.51 51768.98

II ASSETS

D) Non-Current Assets

a) Fixed Assets 580.87 1111.77 1367.48 1613.62

b) Non-current investments 1700.32 3159.48 3917.75 4622.94

c) Deferred Tax Asset 40.58 18.62 20.48 22.12

d) Long Term loans and advances 1518.54 1250.82 1100.72 1023.67

e) Other non-current assets 108.19 28.83 30.55 32.69

Sub- Total Non-Current Assets 3948.50 5569.51 6436.99 7315.05

E) Current Assets

a) Inventories 6506.11 9283.31 10954.31 12365.75

b) Trade receivables 631.58 1162.34 1348.32 1537.08

c) Cash and Bank Balances 474.54 6525.19 7503.97 8329.41

d) Short-terms loans & advances 14638.39 17039.25 18402.39 19690.56

e) Other current assets 1473.23 2167.28 2365.54 2531.13

Sub-Total Current Assets 23723.86 36177.37 40574.53 44453.92

Total Assets (D+E) 27672.36 41746.89 47011.51 51768.98

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 4267.10 6640.05 8499.26 10199.12

Other Income 627.85 1025.52 1107.56 1162.94

Total Income 4894.95 7665.57 9606.83 11362.06

Expenditure -2865.33 -5468.55 -6909.90 -8261.28

Operating Profit 2029.62 2197.02 2696.92 3100.77

Interest -598.19 -1185.40 -1375.06 -1567.57

Gross profit 1431.43 1011.62 1321.86 1533.20

Depreciation -35.38 -49.48 -58.39 -67.14

Profit Before Tax 1396.05 962.14 1263.47 1466.05

Tax -169.37 14.38 -70.50 -92.65

Net Profit 1226.68 976.52 1192.97 1373.40

Equity capital 780.46 996.17 996.17 996.17

Reserves 12862.48 16910.31 18103.28 19476.68

Face value 10.00 5.00 5.00 5.00

EPS 15.72 4.90 5.99 6.89

Quarterly Profit & Loss Statement for the period of 30 SEP, 2013 to 30 JUNE, 2014E

Value(Rs.in.mn) 30-Sep-13 31-Dec-13 31-Mar-14 30-Jun-14E

Description 3m 3m 3m 3m

Net sales 1225.99 747.60 3575.09 2681.32

Other income 254.48 341.41 249.89 262.38

Total Income 1480.47 1089.01 3824.98 2943.70

Expenditure -934.85 -541.03 -3107.30 -2252.31

Operating profit 545.62 547.98 717.68 691.40

Interest -285.95 -349.99 -315.60 -353.47

Gross profit 259.67 197.99 402.08 337.92

Depreciation -12.14 -13.04 -14.24 -14.81

Profit Before Tax 247.53 184.95 387.84 323.11

Tax -4.69 -1.38 21.41 -17.77

Net Profit 242.84 183.57 409.25 305.34

Equity capital 996.16 996.17 996.17 996.17

Face value 10.00 10.00 5.00 5.00

EPS 2.44 1.84 2.05 1.53

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 15.72 4.90 5.99 6.89

EBITDA Margin (%) 47.56 33.09 31.73 30.40

PBT Margin (%) 32.72 14.49 14.87 14.37

PAT Margin (%) 28.75 14.71 14.04 13.47

P/E Ratio (x) 15.03 48.20 39.46 34.27

ROE (%) 8.99 5.45 6.25 6.71

ROCE (%) 9.67 6.78 7.44 7.80

Debt Equity Ratio 0.57 0.85 0.94 0.98

EV/EBITDA (x) 12.65 25.37 21.31 18.99

Book Value (Rs.) 174.81 89.88 95.86 102.76

P/BV 1.35 2.63 2.46 2.30

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.236.25, the stock P/E ratio is at 39.46 x FY15E and 34.27 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.5.99 and Rs.6.89

respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 34% and 4% over 2013 to 2016E

respectively.

� On the basis of EV/EBITDA, the stock trades at 21.31 x for FY15E and 18.99 x for FY16E

� Price to Book Value of the stock is expected to be at 2.46 x and 2.30 x respectively for FY15E and FY16E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.274.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

Real estate in India continues to be a favoured destination globally for investors, developers and non-resident

Indians (NRIs), driven largely by investor-friendly government policies and increasing globalisation. The second

largest employment generation sector after agriculture, real estate contributes about 6.3 per cent to India's gross

domestic product (GDP). The foreign direct investment (FDI) in the sector is expected to touch US$ 25 billion in

the next 10 years from its current US$ 4 billion.

The sector's progress is driven by factors such as rapid urbanisation, a growing trend towards nuclear families,

positive demographics, rural–urban migration, ever-developing infrastructure, higher income levels and housing

demand. The real estate sector, with its growing investment opportunities, is expected to post annual revenues of

US$ 180 billion by 2020.

Market Dynamics

The real estate sector in India is witnessing rapid growth in the residential, commercial and industrial segments.

Real estate development, once restricted to bigger cities, have shown marked progress in smaller cities and

towns owing to availability of banks loans, higher earnings and improved standard of living.

The real estate sector of India is projected to post annual revenues of US$ 180 billion by 2020 against US$ 66.8

billion in 2010-11, a compound annual growth rate (CAGR) of 11.6 per cent. The demand is expected to grow at a

CAGR of 19 per cent in the period 2010-2014, with Tier I metropolitan cities expected to account for about 40

per cent of this growth. As of now, Mumbai, Delhi-National Capital Region (NCR) and Bengaluru cater for 46 per

cent of total office space demand in India. This demand is expected to be rise sharply in Tier II cities such as

Kolkata and Chennai in the period 2010-14.

Today, Delhi-NCR accounts for about 30 per cent of the total mall supply in India. About 53 per cent of demand

for total mall space is projected to come from the country's top seven cities, namely Delhi-NCR, Bengaluru,

Mumbai, Kolkata, Pune, Hyderabad, and Chennai, in the period 2010-2014.

Investment Opportunities

The Indian retail realty sector is projected to grow at around 15 per cent year-on-year over the next 3-5 years as

against a 12-13 per cent nominal growth of India's GDP estimated by the International Monetary Fund (IMF). If

the sector does indeed manage the aforementioned growth, it will touch Rs 34 trillion (US$ 544.73 billion) by

2016.

India's office space stock is estimated to rise by 40 per cent to 642.2 million sq ft by 2017, according to a report

by real estate consultancy Knight Frank India. The current Indian market offers some of the most competitive

rates in the Asia-Pacific region, according to a report by property services firm DTZ. The report also states that

Indian cities will have some of the fastest rental growths in the region over the period 2013-17, but will remain

among the most competitive.

The share of luxury retail space in India will be 1.4 per cent by 2015, according to a report by real estate services

firm Cushman & Wakefield. NCR and Mumbai, areas that have embraced the mall culture, are the two most

favoured destinations for luxury retailers.

The construction development sector, including townships, housing and built-up infrastructure garnered total

FDI worth US$ 22,671.95 million in the period April 2000-August 2013. Construction (infrastructure) activities

during the period received FDI worth US$ 2,280.95 million.

The following are some of the major investments in the Indian real estate sector:

• Godrej Properties Ltd plans to invest Rs 9,000 crore (US$ 1.44 billion) in 15 new real estate projects in

India over the next 10 years.

• Unitech Ltd has signed a Rs 800 crore (US$ 128.17 million) deal to lease an 800,000 sq ft space at one of

its IT Special Economic Zones (SEZ) in Gurgaon, to multinational human resource firm, Aon Hewitt.

• NRI billionaire Mr Ravi Pillai plans to purchase stake worth about US$ 100 in a special purpose vehicle

floated by Pune-based realtor, Panchshil Realty. The investment will go into the construction of Trump

Towers and World Trade Centre in Pune, Maharashtra.

• Infrastructure Leasing & Financial Services (IL&FS) Ltd has claimed a project worth Rs 244.46 crore (US$

39.17 million) from realty firm Emaar MGF for construction work at the latter's residential project at

Gurgaon, Haryana.

• French luxury hotel chain Sofitel, which is managed by Accor Group, is targeting 10 properties in India,

mainly in major luxury destinations, in the next few years.

Government Initiatives

According to the existing FDI policy, 100 per cent FDI in the construction development sector is permitted

through the automatic route. DIPP is looking at relaxing FDI norms further to encourage investment. It has also

proposed a reduction in the minimum capitalisation for wholly-owned subsidiaries from US$ 10 million to US$ 5

million, and from US$ 5 million to US$ 2.5 million for joint ventures with Indian partners.

One of the major initiatives of the Ministry of Housing and Urban Poverty Alleviation (MHUPA) is to provide

affordable housing for poor people living in urban areas. The Jawaharlal Nehru National Urban Renewal Mission

(JNNURM) is one its flagship schemes, a reform driven investment programme which started with the objective

of creating economically productive, efficient, responsive and inclusive cities.

The Real Estate (Regulation and Development) Bill, 2013, as approved by the Union Cabinet is a pioneering

initiative aimed at delivering a uniform regulatory environment to protect the consumer, help in quick verdicts of

disputes and ensure systematic growth of the sector.

Road Ahead

Demand for space from sectors such as education and healthcare has opened up opportunities in the real estate

sector. Also, growth in the number of tourists has led to demand for service apartments. This demand in the

tourism sector is expected to generate 50,000 new hotel rooms over the next four to five years, across India's

major cities.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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