JM Financial initiates Brigade Enterprises with 'Buy'; sees 17% upside

Brigade Enterprises has a proven track record of scaling up its residential, annuity and hospitality businesses through aggressive land acquisition and capital expenditure, JM Financial said

JM Financial has initiated coverage on Brigade Enterprises Ltd. with a 'Buy' rating, citing strong pre-sales momentum, an expanding project pipeline, and improved balance-sheet flexibility following the recent fundraise. 

 

The brokerage assigned a target price of ₹1,020 per share, a potential upside of 17.5 per cent from Friday's close. It expects the company to be well-positioned to fund its next phase of growth across annuity assets and hotels. 

 

According to JM Financial, Brigade Enterprises has a proven track record of scaling up its residential, annuity and hospitality businesses through aggressive land acquisition and capital expenditure. 

 

Pre-sales and rental income grew at a compounded annual growth rate (CAGR) of 37 per cent and 27 per cent, respectively, over fiscal year 2022 to fiscal year 2025 (FY22-FY25), aided by favourable sector tailwinds. Over the past 18 months, the company has added projects worth over ₹250 billion following the fundraise, the note said.  ALSO READ | GE Vernova T&D zooms 11% in trade; Antique terms it a 'good long-term buy' 

Given the strong project pipeline, JM Financial expects pre-sales to grow at a CAGR of 14 per cent over FY25 to FY28, albeit on a high base. The brokerage also highlighted the next leg of growth in annuity assets, with around six million square feet of new completions expected over FY28 to FY30. Brigade's hotel portfolio is projected to double over the same period, JM Financial said. 

 

JM Financial noted that after four consecutive quarters of declining absorption across the top seven cities, the quarterly run-rate has stabilised and is expected to grow at a steady mid-single-digit pace. The brokerage believes sector consolidation will drive performance, pointing out that the market share of the top 14 listed developers in pre-sales rose from 18 per cent in FY23 to 21 per cent in FY25, and further to 24 per cent in the first half of FY26.

 

The brokerage estimates that Brigade Enterprises will generate over ₹3,000 crore of operating cash flow annually over the next three years. It expects the company to spend around ₹5,000 crore on annuity capital expenditure over the next five years, in addition to ₹1,500 crore to ₹2,000 crore on business development for the residential segment. 

 

Backed by healthy cash flows and sufficient headroom for debt, JM Financial believes the company can comfortably fund its planned business development and capital expenditure.  ALSO READ | Analysts see MUFG's 20% stake buy as game-changer for Shriram Finance

Brigade Enterprises' share price movement

The company's stock rose as much as 1.2 per cent during the day to ₹878.1 per share. The Brigade Enterprises stock pared gains to trade 0.7 per cent higher at ₹873 apiece, compared to a 0.63 per cent advance in Nifty 50 as of 10:17 AM. 

 

The counter has fallen 30 per cent this year, compared to a 10.5 per cent advance in the benchmark Nifty 50. Brigade Enterprises has a total market capitalisation of ₹21,372.82 crore.   ========= 

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