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Buy HDIL – Religare

September 12, 2007

Religare has initiated coverage on Mumbai based Realty firm HDIL with a BUY recommendation and a target price of Rs 694.

HDIL has presence in Residential, Commercial, Retail and Slum Rehabilitation. It is a very well established brand especially in Residential and Commercial. HDIL has a land bank of 116 million sft. HDIL’s average cost of land acquisition is Rs 113.9 / sft [excludes post-ipo purchase of Land] while that of DLF is over Rs 300 / sft.

At the CMP of Rs 535 HDIL trades at P/E of 13.3 on FY08E EPS of Rs 40.2 and 7.3 on FY09E EPS of Rs 72.7. Using the NAV valuation approach, Religare analyst arrives at a stock price of Rs 694 / share. HIL currently quotes at 0.8x one year forward NAV which is relatively cheaper than DLF [1.3x] and Unitech [1.1x]. There is a potential upside of 30% in the stock.

Religare has also recommended a BUY on Parsvnath Developers Ltd. Parsvnath quotes at mere 0.6x one year forward NAV.

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