Laggard Mumbai realtor now on radar on new launches, asset-light biz model

Affordable housing
The Mumbai-based realtor this past weekend launched Phase I of the Vasind project in Thane, with 350 units each of one and two BHK flats. The affordable housing project, for which Sunteck had bought 50 acres of land in October 2020, has been priced at Rs 6,000 square feet on carpet area, a 30 per cent premium to local developers’ rate, which analysts said is justified given the company’s brand name.

Analysts said the realtor has been focusing on an asset-light strategy (joint development or JDA model) ever since it acquired SunteckWorld projects at Naigaon in September 2018. The Vasind project, called Sunteck Forest World, is second such aspirational segment project where Sunteck will have 80 per cent revenue share.

“With the shift to an asset-light balance sheet, the company has built a strong pipeline under asset-light model and expects to see heightened sales from the new launches in FY22 – two in aspirational (Vasai and Vasind) and one in the mid-income segment (Borivali). The total expected top line from these launches is estimated at around Rs 1,500 crore,” Antique Stock Broking said.

Sunteck has received RERA approval for the new project and eventually plans to launch 4,000 units, which has 2.4-2.5 msf of residential portion, with the balance being retail area.

Antique’s channel checks suggest the weekend booking was encouraging.

“With the impending festival season, sales will get traction as was witnessed during the Naigaon launch, and we expect booking of 50 per cent of the launched area by the December quarter. The Vasind launch gains significance, as sales volume would gain traction with its launch, especially under the subvention scheme. The Vasind project is under the 10:90 subvention scheme,” Antique said.

The project is located along strong job corridors with multiple SMEs, manufacturing plants, warehouses and logistic parks, which are key to sustaining demand, said analysts.

Sunteck is targeting pre-sales of Rs 1,5o0 crore in FY22, Rs 2,000 crore in FY23 and Rs 2,500 crore in FY24 compared with Rs 1,000 crore in FY21.

Demand revival
CLSA said most large developers in the Mumbai metropolitan region (MMR) indicated a revival of sales in June 2021 following a weak April-May period. It noted that the demand has sustained in the July-August period.

Even as Mumbai’s property registrations declined 30 per cent month-on-month in August, it was due to inflated April-July registrations as the state government had allowed a window of four months to register properties transacted up to March 2021 with lower stamp duty.

Adjusted for the spillover of sales up to March, new sales registrations in August were 19 per cent higher than that in July, CLSA said.

Project pipeline
Sunteck sees Vasai launch in the December quarter and Borivali launch in FY23. The Vasind, Vasai and Borivali projects together span nearly 8 million square feet and have been added by Sunteck under its development portfolio in FY21.

Edelweiss said new project launches are critical to Sunteck’s sales momentum.

“The RERA-driven consolidation is throwing up growth opportunities for organised players such as SRL. We like the company’s diversified presence in MMR and its robust execution capabilities. A revival in housing demand, SRL’s focus on cash flow and steady expansion of project portfolio should hold it in good stead. The company’s low gearing provides room to leverage its balance sheet and capitalise on attractive land purchase opportunities to grow its NAV. New project launches are a key catalyst for the stock,” it said.

ICICI Securities has estimated revenue of Rs 270 crore from the Phase 1 of Vasind project and a potential for Rs 1,200-1,300 crore from the overall project. It sees pre-tax operating surplus of over Rs 500 crore and NAV accretion of Rs 280 crore or Rs 20 per share.

This brokerage has revised its price target on the stock to Rs 475 from Rs 457 apiece. Edelweiss sees the stock at Rs 495. CLSA finds the stock Rs 470 worthy.