Strong project pipeline to ensure sales momentum for Prestige Estates

The launches in the last quarter and a strong outlook has resulted in the stock gaining 21 per over the last month and 42 per cent over three months

After a muted first nine months of 2024-25 (9MFY25), which saw launch delays, Bangalore-based real estate major Prestige Estates Projects Ltd (PEPL or Prestige) ended the financial year on a strong note. The company saw a surge in bookings or presales on the back of four new launches in the fourth quarter (Q4FY25). The sales momentum is expected to continue in FY26 on the back of new launches and sustenance sales from recent launches.

 

The launches in Q4 and a strong outlook have resulted in the stock gaining 21 per cent over the last month and 42 per cent over three months. The stock is the highest gainer in the real estate space for both one- and three-month periods and comfortably outperformed its peer index Nifty Realty, which generated returns of 8.2 per cent and 17.6 per cent, respectively.

 

Prestige launched four projects in Q4 and these are Nautilus (Mumbai Metropolitan Region or MMR), Southern Star and Suncrest (Bengaluru), and Spring Heights (Hyderabad). The four projects saw bookings of ₹5,200 crore and accounted for three-fourths of the overall ₹6,960 crore the company booked in the quarter. For FY25, bookings came in at ₹17,020 crore (-19 per cent year-on-year or Y-o-Y) and this was lower than the guidance of ₹25,000 crore to ₹26,000 crore. 

 

The quantum of launches in Q4 can be gauged from the fact that two launches — Southern Star and Spring Heights — had an area of 5 million square feet (msf) each while the overall launches in 9MFY25 had an area of 10 msf. The company launched 14 msf in Q4.

 

The realty major has a launch pipeline, with a gross development value of ₹42,000 crore and unsold inventory of ₹20,000 crore. It has also guided towards presales of ₹27,000 crore in FY26. The June quarter (Q1FY26) is expected to account for ₹12,000 crore of this given three Mumbai launches. A lower base and a spillover from launches from Q4FY25 are positives as bookings gather momentum in the current year. Eesha Shah of Axis Securities believes that Prestige is well-positioned to achieve a 65 per cent Y-o-Y growth in presales to ₹28,000 crore in FY26. 

 

In addition to the launch pipeline, the company’s diversification strategy has put it in a sweet spot to play the ongoing housing upcycle. Biplab Debbarma and Tanishk Khinvasra of Antique Stock Broking believe that in addition to its strong presence in three key markets — Bengaluru, MMR and Hyderabad — PEPL is looking to establish a foothold in new markets such as NCR (National Capital Region), Chennai and Pune. The brokerage has maintained a “buy” rating, with a revised target price of ₹1,972 from the target of ₹1,594.

 

On the commercial real estate front, Prestige reported an occupancy level of 90 per cent for its office segments, and 99 per cent for its retail assets. The exit rentals for the commercial and retail portfolio stood at ₹5,230 crore and ₹2,185 crore, respectively. The upcoming pipeline for its commercial and retail segments stands at 8 msf and 10 msf, respectively. The company expects rental income moving from the current ₹7,400 crore to ₹44,000 crore by FY29. 

 

Prestige has also been able to bring down its net debt to ₹6,700 crore from ₹7,000 crore over the year-ago quarter. The net debt-to-equity now stands at 0.42 times while the borrowing cost has come down to 10.32 per cent.

 

As the company advances its growth trajectory in both residential and commercial segments, and unlocks value from its hospitality segment, Motilal Oswal Research believes that the stock will see further rerating. It has retained a “buy” rating, with a revised target price of ₹1,938 from the previous ₹1,725.