Buy Brigade Enterprises; target of Rs 345: Edelweiss
Edelweiss’ research report on Brigade Enterprises
Brigade Enterprises’ (BEL) Q2FY18 net profit of INR410mn missed our estimate; new sales (INR2.2bn) were impacted by RERA/GST uncertainty (down 36% YoY, up 18% QoQ) with the company not launching any project during the quarter. We, however, expect BEL’s operations to improve going ahead, led by planned new launches (6msf in H2FY18 including 3msf in affordable housing space). Steady build up in its leasing and hospitality portfolio with improved prospects of portfolio expansion post RERA are key positives. We revise our TP to INR345/share (INR340 earlier) due to lower capital costs (borrowing cost fell 100bps in past 1 year). Maintain ‘BUY’.
Robust Bengaluru market fundamentals and preference for organised players post RERA should aid BEL’s well-balanced portfolio. Pick up in operations will be determined by: (a) Completion of annuity assets; (b) Launch of planned projects, and (c) Demand improvement in Bengaluru market. We lower our discount rate (due to falling interest cost) to arrive at a revised target price of INR345. Maintain ‘BUY/SO’.
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