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Strong end to a challenging year

Along expected lines, Godrej Properties’ (GPL) Q4FY21 gross sales bookings worth Rs26.3bn grew 10% YoY and 77% QoQ on the back of seven new launches which contributed 58% of the quarter’s sales bookings. GPL’s FY21 sales bookings have risen by 14% YoY even in a challenging year and with 19 new launches lined up in FY22E, we expect GPL to target an overall YoY growth in FY22 sales bookings even as the second Covid wave across India is expected to impact H1FY22 sales bookings.

With Rs44bn of cash and liquid investments as of Mar’21 post the recent QIP (net cash of Rs0.6bn), GPL is well positioned to augment its land bank. We retain our SELL Rating with a revised target price of Rs1,047 (earlier Rs1,019) adjusting for QIP proceeds and retain our 50% premium to FY21 NAV of Rs698/share. Key risks to our call are a stronger than expected uptick in GPL’s sales volumes and double-digit residential price growth.

* Resilient performance in FY21 considering Covid impact:

In Q4FY21, GPL achieved gross sales bookings worth Rs26.3bn (up 10% YoY and 77% QoQ). This was along expected lines as GPL’s seven new launches (three in Pune, two in MMR and one each in NCR and Bengaluru) during the quarter contributed Rs15.3bn of sales bookings or 58% of the quarter’s overall sales. For FY21, GPL’s gross sales bookings are up 14% YoY at Rs67.3bn which we believe is commendable considering the Covid impact on the realty industry in this period. GPL also clocked its highest ever quarterly collections of Rs20.4bn in Q4FY21 which led to a pretax/interest operating surplus of Rs7.9bn in Q4FY21 and Rs8.9bn in FY21.

* Strong pipeline of launches in FY22E expected to drive sales bookings:

With around 19 launches lined up in FY22E spread over 12.3msf (excluding Bandra/Worli projects in Mumbai), we expect GPL to clock Rs92.7bn of sales bookings in FY22E (38% 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. We await the company management’s commentary in the results call on Covid impact, demand outlook and any formal sales booking guidance for FY22E.

* Recent equity fund raise to enable GPL to capture growth opportunities:

With Rs44bn of cash and liquid investments as of Mar’21 post the recent QIP fund raise of Rs37bn (net cash of Rs0.6bn), 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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