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[mehak1]

Unitech Limited (Unitech) with a land bank of 13,758 acres reported good set of numbers during the quarter. Consolidated sales was higher by 135.4% yoy at Rs. 10,134.8 mn backed by increased realisation from Real Estate sales and a phenomenal rise in the Consultancy revenues.As total expenses to net sales declined from 67.2% to 50% yoy, EBITDA margin improved 1,727 bps to 50%. Higher other income and lower tax rate led to an increase in consolidated net profit by 298.2% yoy to Rs. 4,101.2 mn. Net profit margin improved 1,655 bps from 23.9% to 40.5%. Unitech’s land attainments in Mumbai, Vizag and Kolkata are expected to provide significant boost to the topline development. The Company’s Consultancy business also gave an extraordinary performance and is back on the growth track. However, we believe that margins will be under pressure in the long run due to rising raw material prices and little improvement in realizations. In order to diversify its portfolio and improve margins, Unitech has plans to enter into Telecom, Financial Services and Steel sector which could provide
a possible upside to the stock. Currently, the stock is trading at a forward P/E of 42x FY08E and 26.7x
FY09E. Based on our NAV estimate, we feel the stock is fairly valued at the current levels. Maintain Hold.

On a yoy basis, consolidated sales grew 135.4% yoy to Rs. 10,134.8 mn driven by better performance of the Real Estate business and fantastic revenue growth in the Consultancy segment. On a consolidated basis, Real estate revenues jumped 145.4% yoy to Rs. 8,302.7 mn, while revenues from the Consultancy business raised from Rs. 55.4 mn to Rs. 771.6 mn. Unitech was able to realise higher prices by 10-25% in Gurgaon in the residential segment. While commercialized property prices
have also gone up, the Company intends to hold some commercial property for sale in the future to realise higher prices. Unitech’s consolidated EBITDA increased 259.5% yoy to Rs. 5,070.5 mn
as the Company was able to make considerable savings in the construction costs. Consequently, EBITDA margin improved 1,727 bps to 50%. The management stated that EBITDA margin would range between 40% and 50% depending upon the mix of properties sold by the Company. While commercial properties provide higher margins, Unitech has held back some of the commercial properties in order to realise better prices. Hence, we expect margins to improve in the coming quarters when these
properties are sold. Consolidated net profit was higher by 298.2% yoy to Rs. 4,101.2 mn, while
net profit margin increased 1,655 bps to 40.5%. On yoy basis, the Company’s other income increased 419.1% to Rs. 507.7 mn. The effective tax rate was lower at 13.9%, though interest expense increase
significantly by 265.1% to Rs. 789.8 mn. Unitech has significant projects up its sleeve in Mumbai and Southern India.


Report card
PE ratio               28.98       22/01/08
EPS (Rs)              12.12      Mar, 07
Sales (Rs crore)          529.54         Sep, 07
Face Value (Rs)               2   
Net profit margin (%)    39.22          Mar, 07
Last bonus              1:1            28/05/07
Last dividend (%)      25            28/05/07
Return on average equity 84.71       Mar, 07