Stock Review: UNITECH

The stock of Delhi-based leading real estate company Unitech has almost fallen by three-fourth in the past one year, thanks to the company's consistent poor performance in the past four quarters. This is partially explained by high debt and poor sales in these quarters. The company has remained underperformer among its peer group when compared with the financials.

For the quarter ended June '11, Unitech recorded a 28% decline in the topline on a consolidated basis, which is higher than the quarter ended March '11. With lower sales and high operational cost, it also witnessed contraction in operating margin by 32%, which is lower than 37% in the quarter ended June '11. On the non-operational cost front, the company has recorded moderation in interest cost, even though erosion in net profit can't be contained, resulting in a fall almost by half to . 98 crore.Unitech is not able to record reasonable net sales despite sustainable momentum in residential sales in the past one year, which accounts close to 80% of its business portfolio.

Unitech has not been able to contain its debt despite raising funds from QIPs and better sales in the past fiscal. It has been sitting on high debt cycle of 246 days for the current fiscal against 158 days in the past fiscal, which is putting pressure on its lenders. On the filip side, the company has recorded its operating cash flow of . 45 crore against . 1,340 crore in the past one year.

Its quarterly earnings are below analyst estimates. And its debt worries will remain as topline growth looks bleak due to its involvement in the 2G scam, but with a positive business impact in coming quarters. In addition to revision in interest rate, high inflation cost will affect sales in the coming quarters.