Unitech – Building real growth

Real Estate sector in the country is firmly set on the path of recovery. Majority of the real estate companies have successfully completed their recapitalization and are now all set to capitalize on the growth phase ahead.

Unitech limited, established in 1972, is a leading real estate developer in India. It is the first developer in North India to be certified ISO 9001:2000 and offers the most diversified product mix comprising residential, commercial/IT parks, retail, hotels, amusement parks and SEZs. The Company is engaged in developing and constructing residential and commercial properties in India and selling immovable properties to customers in India and abroad. Recently, the Company has ventured into the infrastructure business by launching Unitech Infra, thereby leveraging its rich experience and expertise in real estate. The company is looking forward to new launches and is also focusing on an affordable housing segment. For the quarter ended 30 June’10, the company reported a net profit of Rs.177.7crores, an increase of 60.92%. The revenue stood at Rs.697crore. It continued its strong momentum in sales and new launches and also maintained healthy cash flows. Among the large cap Real Estate companies, Unitech limited is now one of the few where excess leverage is not a concern. Going ahead, the company is looking forward to acquire the London listed Unitech Corporate Parks through a cash deal worth Rs.700crore i.e. 22% of the current market valuation. The company would be soon demerging its Infra business, this would be value accretive for the core business of the company. The valuation of the carved out entity – Unitech Infra together with main company left after the demerger should be significantly higher than the present value of this stock.

The company is quite strong fundamentally and has quite healthy expansion plans. The stock is a good pick for one’s portfolio and moreover, it is among the most liquid stocks in the Indian stock markets. The stock currently trading at attractive valuations is a recommended buy with a target price of over Rs.100 in the near term.