Buy Godrej Properties Ltd For Target Rs. 2,600 By JM Financial Services
Strong end to the year; growth to moderate going ahead
Godrej Properties (GPL) reported a strong quarter with quarterly bookings of INR 101.6bn (+7% YoY, +87% QoQ) led by strong demand across new launches and ongoing projects. For FY25, pre-sales reached INR 294bn, surpassing guidance by 9% and increasing 31% YoY, on the back of 29% YoY growth in volume to c.26msf. For FY25, GPL delivered robust performance in terms of cash flows as cash collections increased 46% YoY to INR 189bn and OCF came in at INR 75bn, up 73% YoY. GPL has taken a conservative stance on guidance as it aims to grow its bookings by 10% to INR 325bn in FY26E. However, the management highlighted that GPL has consistently exceeded its guidance since FY23 and intends to maintain the trend going ahead. According to the management, lower guidance is just an attempt to be a bit cautious given the significantly large base and uncertain macro-economic conditions. GPL has almost doubled its market share to 4.3% in Tier I cities in the last 5 years and is aiming to increase it further in the medium term. Our TP has increased by 4% driven by the significant beat on OCF by the company in FY25. We maintain BUY with a revised TP of INR 2,600.
* Record performance led by strong demand: GPL reported highest ever quarterly bookings of INR 101.6bn (+7% YoY, +87% QoQ), which came above our estimate of INR 98bn. During the quarter, the company launched three projects (2 in NCR and 1 in Hyderabad) which contributed 45% to total bookings. For FY25, pre-sales reached INR 294bn, surpassing guidance by 9% and increasing 31% YoY, on the back of 29% YoY growth in volume to 26msf. NCR and MMR continued to be the largest markets for the company for the 2 nd consecutive year with bookings of INR 105bn and INR 80bn, up 4%/23% YoY respectively. However, growth was led by Bengaluru, which witnessed 2x jump in presales to INR 50bn, up 103% YoY, followed by Pune at INR 34bn, up 32% YoY. The imputed EBIT margin for the bookings done in FY25 stood at 26.2% translating to a RoCE (on the expanded capital base) of 42%.
* Robust cash flows: Collections for 4QFY25 hit a record INR 76bn (+ 43% YoY, +121% YoY) primarily led by higher bookings. The construction costs mirrored this growth, rising 41% YoY and overheads were steady, resulting in record OCF of INR 40.7bn (+55% YoY). GPL spent INR 27bn on land and approvals and generated surplus of INR 5.8bn (cash surplus has been recorded only twice since FY22). Collections increased 46% YoY in FY25 to INR 189bn and OCF came in at INR 75bn, up 73% YoY. Net debt was at INR 33bn with net D/E of 0.2x.
* Conservative stance on guidance: Contrary to the historical trend, the company has reduced bookings growth guidance to 10% YoY as it targets to achieve INR 325bn of pre-sales in FY26E (implies 20% growth from FY25 guidance). However, the management highlighted that GPL has consistently exceeded the guidance since FY23 and intends to maintain the trend going ahead. According to the management, lower guidance is just an attempt to be a bit cautious given the significantly large base and uncertain macro-economic conditions. GPL is targeting to launch INR 400bn worth of new inventory and on the BD side; the aim is to add new projects with GDV of INR 200bn.
* Financial performance: 4QFY25 revenue stood at INR 21bn (+49% YoY, +119% QoQ) but EBITDA (including other income) increased only 9% YoY due to higher construction cost and other operating expenses. In FY25, the company delivered 18msf leading to INR 49bn in revenue (+62% YoY) and EBITDA (including other income) was up 79% YoY to INR 20.9bn.
* Maintain BUY with increased TP of INR 2,600: Basis the large project deliveries in FY25, we have increased our revenue estimate for FY26/27 by 2%/9% and have tweaked margin to bring it in line with recent performance. Our TP has increased by 4% driven by the significant beat on OCF by the company in FY25.
* Con-call highlights:
* There is immense growth potential in each of the focused markets. The company has single-digit market share in the Tier-I markets of India and is targeting to take it to double digits in the medium term.
* Being very conservative on the BD guidance of INR 200bn worth of new additions and would be surprised if the company doesn’t exceed it.
* The margin profile of new projects will be similar (to the imputed margins) or better. GPL also prioritises on fast churn rather than getting fixated on absolute margin.
* The site clearance at the Bandra project is happening at rapid pace and there is a visibility on launch within the next 12-18 months.
* The company is not witnessing any slowdown in demand for its projects. The only focus area is to bring supply to the market in a timely manner.
* The spend on construction will significantly ramp-up since the pace of execution will accelerate going ahead.
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SEBI Registration Number is INM000010361
