Buy Prestige Estates Projects Ltd (PEPL) –Target Price Rs.100

 Prestige Estates Projects Ltd (PEPL) is recommended to buy with a target price of Rs.100 over one year. There is nothing commendable about 2QFY12 results. However, the bright spot is the momentum in sales / leasing numbers.
 Quarterly revenue at Rs.140 crore is down 46% qoq as project delay (Neptune Courtyard, Kochi) has significantly impacted 2Q revenue recognition.
 EBITDA margin is 18.7% in Q2 versus 14% in 1Q. The company has sold 1.98 million sq ft of residential area in 2Q as against 0.4 million sq ft in 1Q.
 Average sales price (ASP) is Rs.3587 /sq ft versus Rs.4720 sq ft in 1Q. The decline is due to the shift towards mid income house projects from premium house projects and this shift looks positive from the long term view.
 It has also leased 0.8 million sq ft in 2Q versus 1 million sq ft in 1Q.
 The company has unrecognized sales balance of Rs. 2450 crore, which is 1.5 multiple of FY11 revenue.
 Contracted sales in 2Q is Rs.780 crore and the company is short of only Rs.500 crore to reach its contracted sales target of Rs.15 -16 billion for FY12.
 Net debt of the company increased by Rs.100 crore because of capex incurred on office assets and incremental land payments.
 The stock is currently traded at 13.5 multiple of FY12 expected earnings and at 11 multiple of FY13 expected earnings.