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Rooftop view: GPL leads on key metrics

Godrej Properties (GPL) has been the biggest beneficiary of industry consolidation over the past few years. It is the only developer to have gained market share in launches in every major city where it has a presence, and accounted for the largest share of launches in Pune and the NCR in FY21. By demand, GPL tops the charts in Pune, is number two in the NCR and among top three in the MMR. In three out of four markets, GPL had among the lowest unsold inventory levels in Oct-21.

We believe the company will continue to perform well and benefit from revival in housing demand. Maintain ‘BUY’ with an SoTP-based target price of INR2,837/share.

Launches: Steady increase in GPL’s share

Industry consolidation and lack of fund availability for tier 2/3 developers have led to organised developers gaining market share in launches. However, GPL is the only developer in the country to have gained market share in launches in every major city (where it has a presence) over the past eight years. In fact, in the NCR and Pune, it accounted for the largest share in launches in FY21.

Demand share: The pattern sustains

Through consistent market share gains in demand, the company has emerged as the number one player in Pune, number two in the NCR, and number three in the MMR. In fact, considering that GPL ranks the highest in Pune and the NCR by share of launches since FY20, it would gain additional market shares going ahead, in our view.

Unsold inventory: Least of a worry for GPL

In three out of four markets, GPL has among the lowest inventory levels; in the fourth market, it is in line with peers. This has greater salience since Godrej has the highest share in launches in two out of four markets. It follows thereof that GPL is not only launching more, but also selling more and at a faster clip.

Outlook and valuation: Well-deserved leadership; maintain ‘BUY’

As we argued in our comprehensive sector report Real Estate - The Charge of the Consolidating Brigade, RERA-driven consolidation is throwing up growth opportunities for organised players such as GPL. And by the dint of its performance, the company has emerged at the top of heap in demand, launches and unsold inventory. We believe the pandemic bodes well for the company in the long run since GPL is likely to consolidate its leadership.

Revival in housing demand, GPL’s rapidly expanding project portfolio and its geographical diversification should hold it in good stead. New launches and pre-sales growth are the key stock catalysts, in our view. We maintain ‘BUY/SN’ with a target price of INR2,837/share (35% premium to NAV of INR2,101/share).

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