Target: ₹1100
CMP: €845.80
Anant Raj (ARCP) is transitioning from its real estate stronghold to a diversified business model with strategic investments in data centers (DCs) and cloud services. This shift taps into the growing trends of data localization and digital transformation in India.
With a planned capacity of 300 MW for DC over the next four to five years, the company is leveraging its existing technology parks to improve execution speed and cost efficiency.
ARCP’s foray into higher-margin cloud services (IaaS) in partnership with Orange increases profitability potential, with cloud capacity expected to increase to 25 percent by FY32. The residential business remains robust, with deliveries of 14 msf expected by FY30, generating a cumulative NOPAT of ₹8,510 crore. We model free cash flows for data center operations through FY32 using a discount rate of 11.6 percent, a rent escalation of 3 percent and a terminal growth rate of 3 percent, resulting in an EV of ₹20,000 crore or ₹580/share.
Strong presales, collections and operating cash flows support ARCP’s growth. While execution risks remain, we expect significant revenue and EBITDA margin growth, which will drive long-term value creation.
We initiate coverage on the stock with a buy rating and a TP of ₹1,100.
