 "Godrej Properties")
The stock of the country’s third-largest listed player by market capitalisation, Godrej Properties, is up 27 per cent over the last three months and is trading at Rs 2,005 apiece.
Strong performance in the September quarter, which saw the company post its highest-ever quarterly sales, new project additions and hopes of improvement in cash flows led to the rally.
Even though the stock has given handsome returns, it still trails the peer index, BSE Realty, which has delivered returns of 31 per cent during this period.
Pritesh Sheth and Sourabh Gilda of Motilal Oswal Research believe the buoyancy in the sector is likely to continue given a favorable demand-supply balance, a comfortable inventory position, and healthy pricing power.
Over the last three years, listed players have outperformed the industry growth in terms of bookings by 1.5 times, leading to an increase in the market share of 16.5 as compared to 12 per cent earlier.
With the inventory levels still declining, and pricing strong, developers are pushing for new launches in 3Q to capitalise on the demand, says Jefferies Research.
Even as the valuations of the sector are hovering over the long-term averages and close to 2021 peak multiples, the brokerage highlights that the relative valuations for Godrej Properties are still attractive and the stock remains its preferred pick in the sector.
Godrej Properties recently announced that it has sold inventory worth Rs 2,600 crore in its project Godrej Aristocrat located in Gurugram.
The real estate major sold 600 homes at this project, which is its most successful launch ever in terms of the value of sales achieved, surpassing the previous best worth of over Rs 2,000 crore at its project, Godrej Tropical Isle in Noida last quarter.
The company indicated that Gurugram is an important market with four projects stated to be launched in this market in 2024.
The company was an outperformer in the September quarter with sales of Rs 5,030 crore, which was 109 per cent higher Y-o-Y and aided by seven project launches.
These launches accounted for 80 per cent of its bookings. In addition to the Noida project (Godrej Tropical Isle), its plotted project in Kurukshetra too saw strong traction with sales of Rs 630 crore.
In terms of value, the NCR contributed over half of its bookings in Q2 followed by Mumbai, Bengaluru and Pune.
The company is eyeing bookings worth Rs 14,000 crore in FY24 and plans to launch 34 projects spanning 23 million square feet.
The realtor launched 24 projects in FY23 with an area of 15 million sq ft.
The current pipeline (the company added Rs 35,000 crore worth of projects over the last one and a half years) should help the company drive consistent growth over the next few years.
As these projects get launched, the collections will significantly scale up and may help the company turn free cash flow positive soon, says Motilal Oswal Research.
An increase in realisations, a comfortable debt position and an improving net profit margin could help it achieve a return of equity over 20 per cent.
The brokerage has a ‘buy’ rating on the stock with a target price of Rs 2,300 apiece.
