next »

[Lavanay]

Ansal Housing & Construction Ltd. (Rs.310) -

The Ansal group is a reputed real estate developer predominantly in North India. The company's future
strategy is to focus on development of integrated townships in the suburbs. This will help the company acquire land at relatively low cost and get better realizations and higher returns over time as prices in the townships
appreciate faster than inflation. *

*Despite the residential segment being the biggest contributor, AHCL is now seeing increased activity in commercial division since it has aggressively forayed into shopping malls and retail space. In collaboration with Radisson
Worldwide, it is setting up chain of restaurants across India with "The Great Kebabs Factory" and "Superstars" already operational in Noida. *

*The company has land bank in 22 cities across India and has plans for hotels wherever they have townships. The total value of the projects is close to Rs.6,500 cr. Currently, AHCL has access to an extensive land bank
of about 2,600 acres (67.6 mn. sq. ft. of saleable area with AHCL share being 54.6 mn sq. ft.) either directly or through subsidiaries or through joint developments, majority of which is located in Tier II and III cities
primarily in North India. Importantly, the acquisition cost of these lands is reasonably low, for which company has been able to register better profit margin compared to its peers. *

*For H1FY08, it has clocked a growth of about 30% in sales revenues and 57% growth in profit after tax. For full year FY08, it may achieve a profit after tax of about Rs.65 cr. which would translate into an EPS of Rs.40. The
total value of projects is about Rs.6,500 cr., but its market cap is just Rs.520 cr., and stock is trading at a price to earning ratio of about 8 on its current FY08 earnings. Development work has started on about 2,000 acres
of land bank and work on the remaining land bank will start within a year.

Considering the company's strong project pipeline, we estimate revenues and PAT to grow at a CAGR of 40% to 50% over the next 4-5 years. *

*In this current market, it's difficult to find such undervalued real estate stocks. Add on reactions around Rs.300 level. *