Godrej Properties - Positives priced in - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

Godrej Properties Ltd (GPL) reported an operationally weak Q1FY22 with presales volume of 0.8msf (-69.3%/-81.5% YoY/QoQ) and value of INR 4.9bn (- 67.5%/-81.1% YoY/QoQ). Despite the weak performance, we expect GPL to register presales growth in FY22, given (1) near normalisation of sales momentum in June/July-21, (2) robust launch pipeline (13.3 msf), (3) strong balance sheet with surplus cash of ~INR 35bn, and (4) well recognised brand positioning. We roll forward our valuation to Jun-23, and increase our target price to INR 1,500/sh (earlier INR 1,323/sh) to account for surplus cash (INR 35bn) deployment in new land acquisitions. However, given punchy valuations, we reiterate REDUCE, as all the positives seem fairly priced in.

Q1FY22 financial highlights: Revenue: INR 862mn (+19%/-80% YoY/QoQ, 43% miss). EBITDA: INR (635) mn (INR (535)/ (1,541) mn in Q1FY21/Q4FY21, vs INR (776) mn est.). RPAT/APAT: INR 170mn (INR (202)/371 mn Q1FY21/Q4FY21), vs an estimated loss of INR 73mn. Presales in June-21 have picked up and were around INR 3.3bn (contributing 66% to Q1FY22 sales); July-21 saw further recovery with presales of ~INR 5bn.

Weak presales; new vision for Mumbai; focus on top cities to continue: The presales value for the quarter came in at INR 4.9bn (-67.5/-81% YoY/QoQ) and volume stood at 0.8msf (-69x/-81.5% YoY/QoQ). For FY22, the GPL expects to surpass FY21 presales (INR 67bn), given a robust launch pipeline of 13.3msf. Collections for the quarter stood at INR 12bn (INR 4.5bn YoY). Laying higher growth emphasis on the MMR market, GPL has rejigged its management team with a new CEO at the helm. A good chunk of surplus growth capital will get deployed in Mumbai. The Worli project approval is expected to be sorted out before the Bandra project. Also, GPL is in advanced talks for some redevelopment projects in the city.

Major traction in land banking to pan out over the next two years: GPL will deploy surplus funds over the next 24 months for purchasing land parcels as it expects land costs to tighten after two years. It is targeting to achieve an RoE of around 20% in the long term. New launches, projects completions, and higher share of owned projects will drive revenue and profitability.

Shares of Godrej Properties Limited was last trading in BSE at Rs. 1640 as compared to the previous close of Rs. 1659.75. The total number of shares traded during the day was 74784 in over 5785 trades.

The stock hit an intraday high of Rs. 1679 and intraday low of 1608. The net turnover during the day was Rs. 123032398.

Source : Equity Bulls

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