ICICI Securities has retained a buy call on Signature Global (India), with a target price of Rs.1905

New mid-income housing launch likely to drive sales bookings

Signature recently launched its Daxin Vistas project in Sohna, Gurugram spread over 126 acres with an overall saleable area of 7.2msf. In Phase 1, ~800 independent floors, having an average ticket size of ~INR 20mn, along with residential/industrial plots have been launched. As per our channel checks, overall response to the launch has been decent with estimated sales bookings of >INR 20bn in Sep’24. With the company having already achieved ~30% of its FY25 sales booking guidance of INR 100bn and given more launches lined up for FY25, including second phase of Sector 71, we believe that Signature is on track to comfortably achieve its FY25 guidance. 

(including the ~INR 20bn from Phase 1 of Daxin Vistas).

Opportunity to grow beyond Gurugram, a key monitorable

Over FY21–24, Signature successfully transitioned from being an affordable/mid- income housing player in Gurugram to becoming a mid-income and premium housing developer. In early Mar’24, Signature clocked over INR 36bn of sales bookings from the successful launch of its first premium residential project in Gurugram – average ticket size of INR 35mn/unit; average realisation of over INR 13,000/psf. Further, it achieved Q1FY25 sales bookings of INR 31.2bn driven by the launch of its Titanium premium housing project in Sector 71, Gurugram, which accounted for ~90% of its sales bookings for the quarter. Having established its presence across Gurugram, Signature’s next level of growth may come from other prominent markets of NCR such as Noida where the company may look to augment its land bank through the outright purchase/JDA route.

Key risks: Slowdown in Gurugram market; inability to replenish land bank

We estimate 19% sales booking CAGR over FY24–27

Signature has historically derived the majority of its sales bookings from AH and MH projects. With the successful launch of its first premium residential project in Gurugram, which has clocked over INR 36bn of sales bookings, the company has delivered 63% sales booking CAGR over FY21–24.

The company has a strong launch pipeline of projects with a cumulative GDV of over INR 400bn through FY24–27. With that, we estimate that Signature may clock 19% sales booking CAGR over FY24–27 with sales booking ranging between INR 100–120bn annually over FY25–27E at average realisations of over INR 13,000/psf-plus.

Valuation

Traditionally, listed developers have historically been valued on a DCF-based NAV across the different business segments (residential/office/retail/hotels/others) along with land bank. However, the current buoyancy in the sector observed post covid between FY22–24 has led to companies aggressively chasing growth while keeping balance sheets lean and using internal accruals to fund expansion. This has resulted in companies now also getting a reinvestment multiple of 30–50% premium to NAV along with the 100% market value of land.

Signature’s business model is unique. While the company does not act as a land aggregator, it focuses on launching and completing projects within 4–5 years, reinvesting the surplus for growth and keeping a similar land bank reserve of 4–5 years at any point of time. Hence, we are of the view that the company should be valued on a going concern basis, wherein the embedded EBITDA multiple of ~30% is sustainable over the medium term.