Buy Godrej Properties Ltd For Target Rs. 2,500 By JM Financial Services
Godrej Properties (GPL) has delivered a CAGR of 34% in bookings over the 5-year period FY19-24 driven by significant share of sales from new launches. GPL was able to ramp up its launches from 12msf in FY19 to 20msf in FY24. The company’s market share doubled from 2% to 4% (on a pan-India basis) as it was one of the biggest beneficiaries of industry tailwinds. It has already built a pipeline of c.100 msf and with the recent fund-raise of INR 60bn, the management intends to double down in existing markets with new project additions, which will enable it to deliver consistent growth over the medium term. We expect bookings/collections to grow at a 19%/22% CAGR over FY25-27E to INR 400bn/INR 253bn respectively. Operating cash flows (before interest and taxes) should increase to INR 66bn by FY27E from INR 43bn in FY24. We initiate with a BUY rating and a Mar’26 TP of INR 2,500.
* Pre-sales and cash flows: GPL reported 84% YoY growth in presales to INR 225bn in FY24 and has guided for INR 270bn of pre-sales in FY25E. In 9MFY25, it has already achieved bookings of INR 193bn (71% of annual guidance) and is well placed to achieve the pre-sales guidance, given the strong response to its new launches in NCR and Hyderabad. We expect collections (including JV share) to grow at a 22% CAGR over FY25-27E to INR 253bn and operating cash flows (before interest and taxes) should increase to INR 66bn by FY27E from INR 43bn in FY24.
* Initiate coverage with a BUY rating and TP of INR 2,500: GPL continues to do exceedingly well in pre-sales and business development. Post the fund-raise, it is well placed to further penetrate its existing markets while continuing opportunistic acquisition beyond the top 5 cities. We initiate coverage on the company with a BUY rating and TP of INR 2,500 implying 17% upside. Key risk: (1) Prolonged slowdown in residential absorption, (2) Undertaking margin dilutive BD given the increased competition and (3) Inability to deliver improvement in profitability as anticipated.
On track to retain the largest developer tag for the 2 nd consecutive year:
In FY24, GPL became the largest real estate developer in India with pre-sales of INR 225bn. Its performance was mainly led by new launches, which increased by 65% YoY to INR 230bn in FY24, of which 70% were absorbed during the year and contributed 70% to the total pre-sales. GPL remains on track to retain the tag as it is one of the few developers whose 9MFY25 performance has been in line with its guidance. The company has delivered a 34% CAGR in bookings over the 5-year period FY19-24; during this period, GPL’s market share doubled from 2% to 4% (on a pan-India basis) as it was one of the biggest beneficiaries of industry tailwinds.
NCR and MMR key drivers:
Among the 7 key cities in India, NCR has been at the forefront as it witnessed ~2x jump in units sold and, a 24% CAGR in pricing over FY21-24. GPL was among the very few developers that identified this trend and accelerated supply in NCR, resulting in over 4x jump in presales during this period. In FY24, it also achieved a milestone of crossing INR 100bn pre-sales from NCR, which is higher than the company’s overall pre-sales in FY22. The company had similar success in MMR also, where timely launch of projects in micro-markets like Thane, Wadala and Kandivali propelled their sales from INR 15bn in FY21 to INR 65bn in FY24.
Targeting sustainable growth over the medium term:
Since FY21, GPL has accelerated its business development activity to further strengthen its position in existing markets and gain significant market share. Over FY21-9MFY25, the company has added 80msf of new projects, of which 65msf was added in the last 10 quarters. The company has recently raised INR 60bn, as the management is of the view that low housing penetration in India coupled with continuous improvement in affordability (by way of healthy wage growth and potential peaking of interest rates) offer significant opportunities to double down in its existing core markets and thus will enable it to deliver consistent growth over the medium term.
Please refer disclaimer at https://www.jmfl.com/disclaimer
SEBI Registration Number is INM000010361
