Equity Research Report - Brigade Enterprises Ltd

Summary

We are one of India’s leading developers with over three decades of experience. We have transformed the city skylines of Bengaluru, Mysuru, Hyderabad, Chennai, Kochi and Ahmedabad with our developments across Residential, Offices, Retail, Hospitality and Education sectors.

Company Overview:

• Brigade Enterprises Ltd is an primarily India-based business enterprise, that is carrying on the commercial enterprise of real estate improvement, leasing and associated offerings.
• The Company operates via two segments: Residential and Lease Rental.
• The Company's portfolio covers assets development, assets control offerings, hospitality and education. Its projects are positioned in towns in South India, which includes Chennai, Chikmagalur, Hyderabad, Kochi, Mangalore and Mysore.
• The Company's commercial tasks are designed for software development and enterprise functions. All its buildings are state of art and are provided on a built-to-suit and geared up-to-occupy foundation. They are placed in high commercial, enterprise and information technology (IT) localities.
• The Company through its subsidiary, Brigade Hospitality Services Ltd (BHSL) operates its hospitality tasks.

Key Statistics:

Market Cap: Rs. 11605 Cr.

Current Price: Rs. 505.9/-

52W High: Rs. 585/-

Stock P/E: 55.3

Book Value: Rs. 128.6/-

Dividend Yield: 0.3%

P/B: 3.9

Face Value: Rs.10/-

52W Low: Rs. 376.2/-

Source: www.sharescart.com 

Shareholding Pattern (%):

Source: www.sharescart.com 

Peer Comparison:

Source: www.sharescart.com 

Industry Overview

The real estate sector comprises of four key segments – Residential, Commercial, Retail, and Hospitality. The impact of COVID-19 pandemic was clearly visible on the residential segment. The first quarter of fiscal was a washout for the players as demand saw a steep fall of 79%. According to data from PropTiger, Q1, FY21 saw sales in the eight prime residential markets of India, of 19,038 units as compared to 92,764 units for Q1, FY20. As the lockdown was lifted and government and the Reserve Bank took steps to enhance liquidity and encourage banks to extend home loans at cheaper rates, along with developers offering promotional discounts in order to offload the excess unsold inventory, the subsequent quarters saw growth coming back in the market. This was further aided by many state governments lowering stamp duties. For example, the decision to temporarily lower stamp duty on property registrations by the Maharashtra government helped mitigate the steep decline in sales in the Mumbai and Pune markets that contribute the most to the national stock of unsold homes. The sub Rs 45-lakh price bracket (categorised as the affordable housing segment under income tax laws in India) continued to play an instrumental role in halting the decline as it continued to make the contribution to overall sales during the year.

Outlook:

The country’s real estate sector has seen a slump since late 2016. It began with the demonetization and since then the industry has not seen its glorious days. FY21 was supposed to be the year of strong revival but the pandemic took the sheen out of the sector. FY22 is also witnessing similar trends like FY21 due to the second wave being witnessed across the country, which will impact all domains of the real estate business. However, there are tailwinds for the sector as well. Today, homebuyers can get home loans for as low as 6.65% annual interest. This is in contrast with the average home loan interest rate of 8% seen in January 2020. With the resurgence of the second wave, the office market is expected to remain resilient. It is hoped that the broad-based immunization programme being undertaken will increase the pace of recovery in FY22. There is a market consolidation happening in the sector with organised players market share going up considerably in the current financial year and expected to grow further in the near future.

Source: Company's Annual Report 21-22

Growth Drivers:

Ø  Brigade Group has been identified among ‘India’s 100 Best Companies to Work For’ by the Great Place to Work Institute for the 11th time in a row. The company also ranked the highest among the real estate developers in the largest workplace culture study in the country.

Ø  The Company’s brand tagline, ‘Building Positive Experiences’, is primarily inspired by its customer-centric approach. The emphasis is always on providing its customers with the best designs, products and services at every stage of their journey. This gives it the propensity to create individualised experiences that are both delightful and memorable. The numerous happy customers and the unshakeable bond that has been created over the years is a testament to the customer satisfaction it has been able to enjoy as a brand over the years.

Ø  Multiple business segments – Real Estate, Lease Rental and Hospitality

Ø  Integrated development model – mixed–use development, integrated townships – support the three business segments

Ø  Expanding presence in South India – Bengaluru (HQ), Chennai, Kochi, Thiruvananthapuram, Hyderabad, Mysuru and focus on other geographies like GIFT City, Ahmedabad

Ø  Diverse development models including own projects, Joint Venture and Joint Development projects.

Ø  Strong brand equity earned and nurtured over three decades of delivering positive experiences.

Ø  Steady year-on-year growth in businesses, across residential, offices, retail and hospitality spaces.

Ø  Preferred developer across domains and markets in which we operate.

Ø  Large percentage of our new property sales/leasing happen due to the strong testimonials of our existing customers.

Ø  Strong focus on CSR and impacting thousands of lives every day – at our construction sites, office & retail spaces, schools, hotels and residential projects.

Source: Company's Annual Report 21-22

Financial Snapshot:

Balance Sheet (Rs. in Crores):

Profit and Loss Account (Rs. in Crores):

Cash Flow Statement (Rs.in Crores):

Source : www.sharescart.com 

VALUATIONS:

On the basis of Discount Cash Flow Valuation Method, we

are recommending ‘Buy’ for the stock. Since the stock

offers good opportunity, we initiate a ‘BUY’ signal on the

stock with 12-month price target of Rs 641/- share an

upside of 26.93 % from current levels.