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All eyes on upcoming launches

Along expected lines, Godrej Properties’ (GPL) Q1FY22 gross sales bookings worth Rs5.0bn declined 68% YoY and 81% QoQ owing to second Covid wave impact and absence of subvention schemes and new launches during the quarter. However, sales bookings have picked up again from Jul’21 onwards and with 4-5 planned launches in Q2FY22E, we expect GPL to achieve a 7% YoY growth in FY22 sales bookings.

With Rs41bn of cash and liquid investments as of Jun’21 post the recent QIP (net cash of Rs0.2bn), GPL is well positioned to augment its land bank. We retain our SELL Rating with a revised target price of Rs1,130 (earlier Rs1,047) as we roll forward to Mar’22 valuation and retain our 50% premium to FY22 NAV of Rs753/share. Key risks to our call are a stronger than expected uptick in GPL’s sales volumes and double-digit residential price growth.

* Q1FY22 a blip, performance to improve going ahead: In Q1FY22, GPL achieved gross sales bookings worth Rs5.0bn (decline of 68% YoY and 88% QoQ). This was along expected lines as residential sales were impacted severely in April and May 2021 with bookings of just Rs1.9bn before improving to Rs3.3bn in Jun’21. As per management, sales bookings have improved to Rs5.0bn in Jul’21 and with 4-5 launches in Q2FY22 (two in NCR and one each in Bengaluru and Pune), sales trajectory should meaningfully improve to levels seen in H2FY21. Q1FY22 collections remained resilient at Rs12.7bn (flat QoQ) as construction activity was less impacted. However, with spend of Rs13.7bn on construction, Rs1.0bn on interest/taxes and Rs3.9bn of land capex, GPL reported a cash deficit of Rs5.9bn for the quarter.

* Strong pipeline of launches in FY22E expected to drive sales bookings: With around 21 launches lined up in FY22E spread over 13.3msf (excluding Bandra/Worli projects in Mumbai), we expect GPL to clock Rs72.2bn of sales bookings in FY22E (7% YoY growth), even after accounting for a muted H1FY22 on account of Covid impact. We expect GPL to continue to utilise its digital marketing channels, undertake periodic sales activations and manage on-site labour and construction activity to mitigate Covid impact. Over FY23-24E, we expect GPL to clock over Rs100bn of annual sales bookings in both years subject to launch of high value projects in MMR (Bandra/Worli) and NCR (Ashok Vihar).

* Recent equity fund raise to enable GPL to capture growth opportunities: With Rs41bn of cash and liquid investments as of Jun’21 post the recent QIP fund raise of Rs37bn (net cash of Rs0.2bn), GPL is well positioned to augment its land bank. The company continues to pursue a counter-cyclical strategy of acquiring land largely on outright basis in a stressed residential market at attractive valuations.

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