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Unitech – Q2 Lacklustre Quarter

November 1, 2009

Unitech Ltd’s Revenue fell of 48% and earnings decline of 50% YoY was well below our estimate; on a QoQ basis the performance was relatively better, with flat sales and earnings up 13% given that the company recognized the Gurgaon hotel sale (Rs700m) and earnings of Rs500m in the qtr.

Pre-sold ~10msf of the ~21msf launched; largely driven by its Unihome launches (~5msf). Execution however is still slow with ~35msf under construction (vs. ~33.5msf in 1Q); mgmt expects to ramp up significantly in 2H and is targeting to deliver 30msf over the next 3 yrs, which seems ambitious. Onsite workforce for the company has gone up +300% in 6 months to 15,600 people. Deliveries too are expected to start scaling up. Of the total 30msf of ongoing projects (to be delivered over next 3 years), 22msf of past projects are expected to be delivered by Mar-11.

Unitech is expected to report an EPS of Rs 2.8 and Rs 3.6 for FY10 & FY11 respectively.

Nomura is bullish on the stock – EPS of Rs 2.8 and Rs 5.8 for fy10 and fy11 with SOTP valuation at Rs 112.

CLSA expects Unitech to report EPS of 3.7 and 4.5 for fy10 and fy11.

JP Morgan appears to be extremely bullish on the stock – EPS of Rs 4.3 and Rs 7.0 for fy10 and fy11 with a target of Rs 120.

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