Prajay Engineers Syndicate

Prajay Engineers Syndicate - Bidding acumen, buoyantrealty prices to boost earnings growth of 150%+ over next two years


Key Takeaways:

Prajay has been into realty development for the last two decades andis ably positioned to capitalize on the buoyant realty market in Hyderabad.Property prices have doubled yoy and are expected to surge further in themedium term due to Hyderabad's rising prominence as an alternative toBangalore.

Land titles are quite transparent as the deals are made directlywith the company and not routed through a promoter or interested parties.

Prajay has a landbank of about 10m sq. ft. (about Rs 1bn), thoughwith an approx. market value of Rs 7bn. Development cycle time is around18-24 months.

Prajay has a mix of mass housing and high-end housing projects. Themass housing (less than 1,500 sq. ft.) yields it Section 80I benefits of taxcredits on income from such projects. The high-end housing yields it marginsof over 30%.

Prajay is developing an 80-acre plot comprising high-end villas, agolf course and a five-star hotel. The golf course is on a BOOT basis, for a35-year concession period. It is also developing other residential andcommercial dwellings, which, together, would add about 10m sq. ft. ofdeveloped space by FY10.

The golf course would be housing a 300-room five-star hotel. Thisproperty is in the vicinity of the new expressway, a 'ring road' that wouldconnect all the important destinations such as the upcoming newinternational airport.

Prajay's acumen at bidding is so good that it recently outbidReliance (ADAG) for 7,400 sq. yd. in an eastern part of Hyderabad. Reliancehas now offered to buy the land from Prajay and deploy Prajay's services todevelop a commercial dwelling on it.

Priced attractively at 6x PER of FY07E earnings of Rs 30 and growing at an over 150% CAGR to FY08.



Key Figures

March FY04 FY05 FY06 FY07 FY08
Net Sales (Rs m)178 233 810 2,460 6,500
PAT (Rs m) 5 44 200 690 1,628
PAT Growth (%)(41.7) 818.7 349.8 245.0 136.0
EBITDA 36 74 259 920 2,275
EPS (Rs) 0.6 5.8 8.8 30.2 71.3
PER (x) 286.7 31.3 20.5 6.0 2.5
Cash EPS (Rs) 1.6 6.9 9.2 32.9 76.1
FCPS (Rs) 61.7 (16.2)(20.1) (26.7)(24.4)
CPER (x) 113.3 26.0 19.5 5.5 2.4
EV / EBITDA (x)42.3 20.5 15.5 4.1 1.7
EV / Sales (x) 8.5 6.6 5.0 1.5 0.6
RoE (%) 4.8 34.4 16.7 36.6 46.3
RoCE (%) 4.6 20.7 15.2 23.12 8.1