Is Sunteck Realty Limited a Value Pick?

Is Sunteck Realty Limited a Value Pick?

Sunteck Realty is a 1800 crore marketcap and 925 crore (FY14) revenue making company which extends its business to real estate product line which includes residential, commercial, retail, hotels and entertainment parks.  Its development activities cover the major metros and mini metros of Indian, which include Mumbai, Nagpur and Goa.

Sunteck Realty limited – 10 Years Stock Price chart.

Screen Shot 2015-03-26 at 6.11.28 PM

The stock is now trading at Rs.249.25, which is close to lowest price for last five years, and it’s available at 10.3 PE which is 36% of Industry Average PE and having healthy ROE of 38.5% encourages for further analysis.

Looking at the price it trades and value it offers, its like an invest now and analyze later kind of stock… But why hurry … lets dig it deeper to find whether the value it offers is worth the risk involved in realty business.

Okay… let analyze how well the company performed in last few years by looking at key business performance indicators:

  •  Consistent growth in cash flow for last 5 Years indicates firm is able to sell its products well.
  •  Profits had grown at CAGR of 65% for last 5 years.
  •  Greater profit margin than industry average indicates firm’s strong competitive advantage.
  •  ROE of 38.55 exhibits firm’s excellent and highly effective management.
  •  Long-term debt coverage under 5 years indicates debt is well within the firm’s control.
  •  My fundamental ranking model ranked Sunteck Realty at No:5 out of 180 listed construction firms.

Lets get into the most important part THE FUTURE, what’s gonna be growth potential, cost of financing its operations, will the company sustain its competitive advantage, how well its gonna manage its assets and investments…

From the management:

Key Takeaways from Kamal Khetan CMD, Speaking about the company’s third quarter performance.

  •  The current debt on the books is very negligible at around Rs 350 crore for 5-6 projects out of the total 24 projects with the net worth of the company being around Rs 1500 crore.
  •  Rs 2191 crore of unrecognized sales and the Rs 5200 crore inventory, will hit profit and loss account in next 8-10 quarters.

Assuming company monetizes 60% of its inventory, we can expect FY’16&17 revenue and EPS to be 1400&1500 crore and INR65&82 respectively, so at current price the stock looks cheaper at FY’17 PE of 3

What is sell-side analysts take on Sunteck Realty Limited ?

Analyst forward estimates:

Screen Shot 2015-03-26 at 9.04.34 PM

Analysts consensus rating as on 25th March:

Screen Shot 2015-03-26 at 6.12.19 PM

(Visited 158 times, 1 visits today)

Leave a Reply

%d bloggers like this: