CRISIL maintains valuation grade of 4/5 to Ashiana Housing

CRISIL Research has come out with its report onAshiana Housing . The research firm has maintained the fundamental grade of 4/5 to the company in its May 31, 2012 report.

Ashiana Housing Ltd's (Ashiana's) Q4FY12 results significantly exceeded CRISIL Research's expectations on higher-than-expected revenues and operating margin. Driven by growth in revenues, earnings beat our estimates and grew 57% y-o-y to Rs 267 mn. We may revise our earnings estimates post discussion with the management. We continue to remain positive on Ashiana given its strong brand in the affordable housing segment and maintain our fundamental grade of 4/5.

Q4FY12 and FY12 consolidated result analysis
• Q4FY12 revenues grew 68% y-o-y and q-o-q to Rs 903 mn and beat our expectations of Rs 532 mn. The growth was driven by revenue recognition in some of the key projects such as Rangoli Gardens, Jaipur and Ashiana Aangan, Bhiwadi. Bookings during the quarter remained strong at 0.5 mn sq.ft. - highest quarterly run-rate till date - vs. 0.42 mn sq.ft. in Q3FY12 and 0.38 mn sq.ft. in Q4FY11. Average realisation grew 15% y-o-y and 5% q-o-q to Rs 2,302 per sq.ft. in Q4FY12. FY12 revenues grew 62% y-o-y to Rs 2,431 mn.

• Despite increase in realisations, EBITDA margin declined 630 bps y-o-y to 36.2% in Q4FY12 mainly due to increase in raw material costs. However, it was above our expectations of 34.5%. On a q-o-q basis, EBITDA margin improved 390 bps due to increase in contribution from high-margin projects such as Lavasa, Pune and Rangoli Gardens, Jaipur. For FY12, EBITDA margins declined 180 bps y-o-y to 34.5%.

• Despite a decline in EBITDA margin, PAT registered strong growth of 57% y-o-y to Rs 267 mn due to lower tax expenses. EPS was reported at Rs 14.3 vs. Rs 9.1 in Q4FY11. FY12 PAT grew 59% y-o-y to Rs 696 mn.

Analysis of FY12 standalone results
• Revenues grew 51% y-o-y to Rs 2,180 mn in FY12. EBITDA margin improved slightly by 40 bps y-o-y to 38.1%.

• PAT grew 62% y-o-y to Rs 687 mn driven by revenue growth and improvement in EBITDA margin.

Change in accounting policy from FY12 onwards
The company will transition to the contract completion method of accounting from FY12 onwards vs. the current percentage completion methodology. Owing to this, revenue recognition in the projects launched after April 2012 will undergo a change but there will be no impact on cash inflows. We will provide further clarity on the same and incorporate changes in the earnings estimates, if any, post discussion with the management.

Valuations: Current market price has upside
We continue to value Ashiana by the net asset value method. Our fair value is Rs 205 per share. We may revise it post interaction with the management. At the current market price of Rs 173, the valuation grade is 4/5.

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