ICICI Securities raises Signature Global target price, sees 35% upside

Following the boost in its target price, Signature Global share gained 1.77% intraday. The price hike was attributed to its strong project portfolio and its scope for expansion beyond Gurugram.

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Signature Global in focus: Domestic brokerage ICICI Securities has raised its target price for real estate developer Signature Global to Rs 1,905 per share, up from the previous target of Rs 1,707, reflecting a potential upside of 35 per cent.

“We retain ‘Buy’ on Signature Global India (Signature) with a revised target price of Rs 1,905 (earlier Rs 1,707), valuing the company at 10x FY24-26E (earlier 9x) average embedded earnings before interest, taxes, depreciation and amortisation (Ebitda) on sales bookings,” Adhidev Chattopadhyay and Saishwar Ravekar of ICICI Securities said in a note.

Meanwhile, the increase in target price followed the company's successful foray into the mid-income and premium housing segments. New launches in the premium segment at Sector 37 and Sector 71 in Gurugram, which took place between January and June 2024, have shown strong demand.

On the bourses, Signature Global stock soared as much as 1.77 per cent to hit an intraday high of Rs 1,435 per share, following the increase in target price.  

Factors behind the increased target price:

Robust project portfolio
As of June 2024, the company boasted a strong portfolio comprising 51.3 million square feet (msf) of saleable area across its ongoing and upcoming projects. These future projects, with a cumulative Gross Development Value (GDV) exceeding Rs 45,000 crore, are slated for launch between FY24 and FY28. 

Thus, analysts at ICICI Securities anticipate that mid-income housing projects will constitute 65-70 per cent of the portfolio, with realisations expected to surpass Rs 10,000 per square foot. 

Analysts highlighted that the company has already achieved approximately 30 per cent of its FY25 sales booking target of Rs 10,000 crore. Additionally, forthcoming launches such as the Sohna low-rise floors and the second phase of Sector 71 are set to bolster this trajectory, placing the company on track to meet its FY25 goals comfortably.

Opportunity to grow beyond Gurugram
From FY21 to FY24, the company transitioned successfully from an affordable and mid-income housing developer in Gurugram to a player in the mid-income and premium segments. 

In March 2024, Signature recorded sales bookings exceeding Rs 3,600 crore from the launch of its first premium residential project in Gurugram, with an average unit price of Rs 3.5 crore and realisations over Rs 13,000 per square foot. 

For Q1FY25, the company achieved sales bookings of Rs 3,120 crore, driven primarily by the launch of its Titanium premium housing project in Sector 71, which accounted for around 90 per cent of the quarter’s sales. 

With a solid foothold in Gurugram, the company is well-positioned for growth in other key NCR markets, such as Noida, where it may expand its land bank through direct acquisitions or Joint Development Agreements (JDAs).

On the flipside, analysts highlighted potential risks including a slowdown in the Gurugram real estate market and challenges in replenishing the company’s land bank.

At 11:18 AM, shares of Signature Global were trading 1.66 per cent higher at Rs 1,433.30 per share. In comparison, BSE Sensex was trading 0.52 per cent lower at 82,127.91 levels.