Godrej Properties - All eyes on upcoming launches - ICICI Securities

Along expected lines, Godrej Properties' (GPL) Q2FY21 gross sales bookings worth Rs10.7bn declined 26% YoY and 30% QoQ as the company phased out its 10-90 builder subvention scheme (80% of overall sales in Q1FY21). The company incurred Rs7.0bn of land spend in Q2FY21 which led to net debt levels rising by Rs9.8bn QoQ to Rs27.3bn (net D/E of 0.57x). GPL's H1FY21 sales bookings have risen by 11% YoY and with ~13msf of launches lined up in H2FY21, GPL continues to target an overall YoY growth in FY21 sales bookings on a FY20 base of Rs59.2bn. With Rs15bn of cash and liquid investments as of September 2020, GPL is well positioned to augment its land bank. We downgrade our Rating to SELL from REDUCE with an unchanged target price of Rs826/share post the 13% rise in stock price over the last three months.

- Steady sales bookings in Q2FY21: In Q2FY21, GPL achieved gross sales bookings worth Rs10.7bn (decline of 26% YoY and 30% QoQ). This was along expected lines as the 10-90 builder subvention scheme was phased out by the end of July 2020 (contributed to 80% of Q1FY21 bookings) and absence of any major launches during the quarter. NRI share of sales stood at 25% in Q2FY21 vs. 50% in Q1FY21. For H1FY21, GPL's gross sales bookings are up 11% YoY at Rs26.1bn which we believe is commendable considering the Covid impact on the realty industry in this period. GPL currently has 8-9msf of unsold inventory which is ~12 months of inventory and it has a strong pipeline of launches for the festive season.

- Net debt rises QoQ owing to land spend: GPL clocked Rs6.8bn of customer collections in Q2FY21 (Rs4.2bn in Q1FY21) which is ~70% of pre-COVID levels. Against this inflow, the company incurred construction spend of Rs6.7bn, land capex of Rs7.0bn (Rs2.5bn for Ashoka Vihar, Delhi and Rs2.0bn for Faridabad, NCR were major land payments) and Rs1.3bn of interest/taxes leading to net debt increasing by Rs9.8bn QoQ to Rs27.3bn (net D/E of 0.57x). As per company, net debt/equity may rise to 1:1 as it continues to pursue an aggressive business development strategy. At the same time, GPL expects trajectory of customer collections to improve significantly in H2FY21 as construction activity has picked up across its project sites with labour workforce at 130% of pre-Covid levels at the end of September 2020.

- Targeting growth in FY21 sales bookings: With ~13msf of launches lined up in H2FY21 (excluding Bandra/Worli projects), GPL continues to target an overall YoY growth in FY21 sales bookings on a FY20 base of Rs59.2bn. Further, with Rs15bn of cash and liquid investments as of September 2020, GPL is well positioned to augment its land bank at attractive valuations in a stressed residential market.

Shares of Godrej Properties Ltd was last trading in BSE at Rs.1037.7 as compared to the previous close of Rs. 1139.35. The total number of shares traded during the day was 153359 in over 9643 trades.

The stock hit an intraday high of Rs. 1136.05 and intraday low of 1027.35. The net turnover during the day was Rs. 163915486.

Source : Equity Bulls

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