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All eyes on festive season launches

Along expected lines, Godrej Properties’ (GPL) Q2FY22 gross sales bookings worth Rs25.7bn increased 140% YoY and 418% QoQ owing to Rs13bn of sales from new launches during the quarter. With a strong pipeline of 18 planned launches spread over 11msf in H2FY22, we expect GPL to achieve a 22% YoY growth in FY22 sales bookings at Rs82.2bn. With minimal net debt of Rs0.2bn as of Sep’21 post the QIP fund raise of Rs37bn in Q4FY21, GPL is well positioned to augment its land bank. We retain our SELL Rating with a revised target price of Rs1,205 (earlier Rs1,130) as we incorporate new projects and retain our 60% 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.

* Q2FY22 sales bookings bounce back strongly: In Q2FY22, GPL achieved gross sales bookings worth Rs25.7bn (increase of 140% YoY and 418% QoQ). This was along expected lines as Q2FY22 saw four new launches which contributed Rs13.0bn of sales bookings. Q2FY22 gross collections were healthy at Rs17.3bn as construction activity was less impacted. However, with spend of Rs13.1bn on construction, Rs1.8bn on interest/taxes, Rs3.3bn of land capex and Rs2.6bn of negative JV project adjustments, GPL reported a cash deficit of Rs2.6bn for the quarter. As per GPL management, the company has taken price hikes of low to midsingle digits across projects to mitigate the impact of input cost inflation. The company expects more meaningful price increased from FY23E at an industry level for organised players and expects a volume driven recovery in H2FY22.

* Strong pipeline of launches in FY22E expected to drive sales bookings: With around 18 launches lined up in H2FY22E spread over 11.0msf (excluding Bandra/Worli projects in Mumbai), we expect GPL to clock Rs82.2bn of sales bookings in FY22E (22% YoY growth), even after accounting for a muted Q1FY22 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 Rs120bn 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 minimal net debt of 0.2bn as of Sep’21 post the QIP fund raise of Rs37bn in Q4FY21, 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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