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Motilal Oswal Report
After a decade of muted performance, Kolte Patil Developers Ltd. is witnessing a strong growth in pre-sales as bookings reported 36% compound annual growth rate over FY21-23. Given its strong pipeline, we believe the company can maintain 25% CAGR in pre-sales at least for the next two years with further room for growth from new project additions.
While sustainability of growth beyond that level depends on its ability to close new project additions, the pick-up in pace of BD activity in the last 18 months as well as strong balance sheet should enable Kolte-Patil to focus on project acquisitions. Its past track record of steady margins and cash flows also implies that growth will be underpinned by profitability and execution.
We value the existing pipeline and targeted project additions of Kolte-Patil in FY24 based on an net present value basis to arrive at a fair value of Rs 700, indicating potential upside of 34%. We initiate coverage on the stock with a Buy rating.
Key downside risks:
inability to add new projects as intended will hurt future growth; and
any slowdown in demand momentum will lead to a reduction in our pre-sales estimates and also a reduction in spending on new project additions.
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