We recommend a ‘buy’ on Sunteck Realty for the following reasons:

Sunteck Realty (Buy) CMP: Rs.269 Target: Rs.376

We recommend a ‘buy’ on Sunteck Realty for the following reasons:

Good pick up in sales: 4QFY15 sales of Rs.1,644 were up about 66 per cent y-o-y, on the back of good sales in 3QFY15. Good pick up in sales by Sunteck and Oberoi over the past couple of quarters suggest green shoots of demand recovery in Mumbai, although traction in super luxury projects needs to be monitored.

Cash flows remain healthy: Collection of Rs.173.1 crore in 4QFY15 was comfortably ahead of construction cost incurred at Rs.43.3 crore. Upcoming launches: Signia Pride (Andheri E) and Sunteck Centre II (BKC) are ready for construction commencement. Approvals are in process for Signia Orion (Airoli). Management estimates revenue potential of ~₹4.2bn from these projects.

Key risks: 

• Execution delays 
• Demand slowdown and price cuts 
• Potential conflicts of interest with joint venture/ joint development partners
• Regulatory/ political risks.