Not so happy Q4 results expected for realty companies

Real estate companies reeling under the bad debt and falling sales graph are expected to record yet another bearish quarterly results with most of the listed companies’ shares already in the red. Listed real estate companies represented by the Realty Index on BSE have witnessed a fall of 1.7 per cent over the past one month. The BSE Sensex fell by 1.4 per cent. This indicates benign expectations from the stock market from real estate companies.

Analysts expect these companies to report a decline in revenue and profit growth. Consolidated sales could improve due to new project launches. However, profitability of companies is expected to remain under pressure. The consolidated sales growth in real estate companies is likely to 20 per cent for the quarter to March 2012 in comparison to the quarter to March 2011. The net profit growth is expected to fall by an average 40 per cent over the year ago period.

Analysts do not expect any significant debt reduction for real estate companies. “Lack of asset sales during the quarter could lead to some addition to consolidated debt for the company,” says ICICI Securities on DLF, the biggest real estate company. Companies like DLF have been looking to sell non-core assets like land parcels and joint ventures in the hotels business. However, these sales are unlikely to be completed in the quarter to March 2012.

Kotak Securities expects DLF to report a 20 per cent fall in sales and a 43 per cent fall in the net profit. Oberoi Realty is expected to report a 27 per cent drop in sales and 34 per cent fall in the net profit. HDIL is expected to report a 12.5 per cent drop in the sales growth and a 44.7 per cent drop in the net profit. “Floor space index or FSI sale in HDIL is likely to be the major contributor to its earnings given lower sales,” ICICI Securities said on HDIL. HDIL focus is on redevelopment projects.Analysts expect these projects to pick up in the second half of financial year 2012-13.

Not all companies are expected to show poor profit growth. Companies like Purvankara Projects and Sobha Developers are expected to report a steady to flat growth in sales as their focus is on the fast growing region in South India. Bangalore has witnessed a significant demand for housing and the two companies have remained concentrated most on this market. Kotak Securities expects Purvankara Projects to report sales growth of 25 per cent and a net profit growth of 83 per cent. Sobha Developers is expected to report a flat in sales and a 4 per cent growth in the net profit over March 2011 quarter.