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Delivers a consecutive quarter of record bookings

* Godrej Properties (GPL) reported the highest ever bookings of INR57b, up 76%/14% YoY/QoQ and 14% above our estimate. For 9MFY24, pre-sales stood at INR130b, up 59% YoY.

* Sales volume was flat YoY but declined 17% sequentially to 4.3msf. Blended realization too was at an all-time high, as it increased 79%/14% YoY/QoQ to ~INR13,200/sft, due to higher contributions from the premium projects.

* GPL’s performance was led by new phases/project launches that generated ~73% of total sales. It launched eight new project/phases with a combined saleable area of ~6.75msf. Total launches stood at 13msf in 9MFY24.

* GPL has indicated that a few of its key projects, such as Worli (MMR), Ashok Vihar (NCR), and Sarjapur (Bengaluru) are likely to be delayed. However, excluding these projects, the launch pipeline for 4QFY24 remains strong at ~9msf. While management has reiterated its guidance to achieve INR140b of pre-sales in FY24, we expect the company to clock bookings of INR195b. 

* Revenue jumped 68% YoY to INR3.3b vs. our estimate of INR1.1b, due to higher-than-expected sales from the completed projects. It reported an operating loss of INR416m, and its PAT grew 11% YoY to INR627m aided by other income of INR2.2b.

Healthy OCF; debt continues to inch up led by business development

* GPL reported gross collections of INR27.2b, up 27% YoY, and the company generated an OCF (post-interest and tax) of INR5.8b during the quarter.

* GPL spent INR12.5b for land and approvals, which resulted in a cash burn of INR7.3b. Gross debt increased to INR108b compared to INR102b in 2QFY24, and it has a cash balance of INR43b.

* The net debt/equity ratio stood at 0.72x, and management maintained its guidance of keeping it between 0.5x and 1x of equity in the near term.

Key highlights from the management commentary

*  Guidance: GPL will comfortably exceed its full-year guidance of INR140b, and is also on track to deliver 12.5msf in FY24. Over the medium term, it is confident of sustaining 15-20% YoY growth. Sector 89 & Sector 146 (Gurugram), Kandivali (MMR), and OMR Road (Bengaluru) are the key projects along with a few others that are slated for launch in 4QFY24.

*  Business development: GPL has spent INR19b towards new additions of INR80b so far in the year. In 4QFY24, it expects an outflow of INR12-13b towards land/FSI cost (including INR6b for Ashok Vihar land). While the company will conclude a few more deals in 4Q, management believes that the company has a strong project pipeline and hence can deliver sustainable growth over the next 2-3 years, even without aggressive spending on BD.

*  NCR performance: GPL’s current portfolio will certainly enable it to sustain its improved performance in the market. GPL has made significant new additions in Gurugram and Noida and expects 1-2 projects to be launched each quarter. It is mindful of the sharp rise in overall demand and pricing witnessed in the NCR market and currently does not see any demand concerns. Management does not expect the trajectory of sharp price growth to continue and current levels will form a base for gradual hikes in future.

Valuation and view

* GPL has largely achieved its annual pre-sales target in 9MFY24 and given the strong launch pipeline of 9msf in 4QFY24, it is on track to deliver another record year in terms of bookings. Hence, we raise our FY24E pre-sales by 13% to INR195b.

*  Management intends to launch the recently acquired projects on priority, which would accelerate bookings growth and enable higher cash flow given favorable ownership of new projects.

*  We believe GPL will surprise on growth, cash flows, and margins, given its strong pipeline and healthy realizations, which have been the key investor concerns. We reiterate our BUY rating with an unchanged TP of INR2,855, implying 24% potential upside.

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