Suraj Estate stock rallies 9% on healthy outlook; up 101% in one month

Brokerage firm Nuvama Wealth and Investment has initiated coverage on Suraj Estate with a 'BUY' rating and a target price of Rs 757, valuing the stock at 1.4x FY26E NAV.

Shares of Suraj Estate Developers, a leading real estate player focused on South Central Mumbai (SCM) market, hit a record high of Rs 629, surging 9 per cent on the BSE in Thursday’s intra-day trade after the company said it entered into a definitive agreement for sale with the Clearing Corporation of India (CCIL).

The agreement pertains to the sale of an additional area comprising of 7, 8 and 9 (part) floors to be constructed over existing building known as CCIL Bhavan, which is located Dadar, Mumbai. The sale covers a carpet area of about 22,410 square feet valued at Rs 89.78 crore thereabouts, Suraj Estate said in an exchange filing.

Suraj Estate has a residential portfolio located in the markets of Mahim, Dadar, Prabhadevi and Parel, which are submarkets of the South-Central Mumbai micro market where they have established their presence. The company is focused primarily on value luxury, luxury segments and commercial segment. The company is now venturing into residential real estate development in Bandra sub-market.

The stock was trading at highest level since its market debut on December 26, 2023. In the past one week, the stock price of Suraj Estate soared 34 per cent, while in the last one month it has zoomed 101 per cent. Currently, the stock quoted 75 per cent higher over its issue price of Rs 360 per share.

In the past quarter, Suraj Estate received an amicable resolution of a longstanding litigation, signifying a significant milestone for the company and reinforcing dedication to excellence in the real estate domain. This favourable resolution not only marks a crucial achievement but also unlocks a sales potential of Rs 350 crore for the company, the management had said while announcing March quarter (Q4FY24) results on May 7.

Furthermore, the projected redevelopment of five buildings is expected to generate an additional Rs 225 crore, further enhancing the company's financial outlook, the management said.

Meanwhile, brokerage firm Nuvama Wealth and Investment initiated coverage on Suraj Estate with a ‘BUY’ rating and a target price of Rs 757, valuing the stock at 1.4x FY26E NAV.

“The company’s strong redevelopment capabilities, healthy development pipeline and a well-located land bank drive our confidence in its long-term growth story. Our optimism is also supported by a structurally buoyant home market,” the brokerage firm said in its report.

Suraj Estate has 13/18 ongoing/upcoming projects, with an inventory/saleable area of 0.12mn sq. ft./ 0.9mn sq. ft. (gross development value (GDV): ~Rs 631 crore/~Rs 5,200 crore). It has land reserves of ~2.6 acres that will be used for future development.

The brokerage firm expects the entire GDV of ~Rs 5,831 crore to be liquidated by FY32 and see a cash surplus of ~Rs 3,579 crore from ongoing and upcoming projects. It sees new project additions once it launches most of its existing projects. “We value Suraj Estate at a 40 per cent premium to its FY26E NAV considering its land reserves and ability to aggressively add new projects in its existing micro-market given its brand value and improved Balance Sheet,” analysts said.