We upgrade HDIL to ‘outperform’ (earlier ‘underperform’) with a target price of Rs 104 per share (earlier Rs 64). We revisit our investment thesis on HDIL given that the company is delivering on its debt reduction plans. We note that HDIL is a high-risk and a high-return stock where news flow often remains volatile. We think if the management delivers on the debt reduction and new launches, the stock can re-rate significantly.
HDIL has reduced its debt by Rs 1000 crore over last four quarters driven by asset sales (entertainment and leisure businesses). HDIL’s net debt stood at Rs 3,200 crore at Q3FY15 end and the company expects to bring it down further to Rs 2,800 crore by FY15 end.
The pick-up in construction and sales momentum augur well for sales. Over H1FY15, HDIL has improved construction momentum across projects, which is improving its pre-sales.
We had recently met the senior management to understand about their large township project (planet HDIL in western suburbs of Mumbai).
This project has a total saleable area of 55 million square feet and is likely to be launched in CY15e given that environmental clearance is in place.
Macquarie
