Nitesh Estate: A multibagger in process

Company

Nitesh Estates  is an integrated property development company  headquartered  in Bangalore, India. Founded in 2004, has  grown into a company renowned for its above average developments in Office Buildings, Residential, Hotels and Shopping Malls. Within few years of its inception, the firm has brought more than 20 million sq ft of space under development as premium living, working, lifestyle and leisure space. The company has expanded its services to Goa, Chennai, and Kochi.

Recent Development

• Goldman Sachs and Nistesh Estates announced an agreement to jointly invest in income producing commercial real estate assets in India for upto $250 million. This partnership will bring produce fruitful results in the next 3-5 years.
• Nitesh Estates has a very strong portfolio of 20 ongoing projects with a total revenue potential of Rs 46 billion of which Rs 35 billion is still to be booked and recognized. In line with our strategy of diversifying revenue streams, they recently acquired a shopping mall in one of the prime locations in Pune. This will provide the firm with a recurring income stream of Rs 450 million.

Financial Performance

The firm ended FY15 with a revenue of Rs 2,906mn. The company reported EBITDDA of Rs 687 million, up by 13% (y-o-y). The margins recorded 13.0% which is an increase of 344bps (y-o-y). The net profit recorded Rs 309 million which is a substantial 31% increase over previous year. The PAT margins stood a

t 10.6%.

Industry

The Indian real estate market size is expected to touch US$ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country's gross domestic product (GDP). Also, in the period FY08-20, the market size of this sector is expected to increase at a compound annual growth rate (CAGR) of 11.2 per cent. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs.

Valuation

Nitesh estate vs Nifty50

Nitesh estates is currently trading at a PE of 12x (industry PE: 24x). Hence, we suggest a BUY for a target of Rs 25 for the next six months period. The stock has multibagger attributes, hence we also suggest to keep holding the stock for the next three years.

Source for information in the post: Company, IBEF.