Launch pipeline key for Godrej Properties after Q1 miss

After a record 2017-18, sales fell 44 per cent in April-June quarter

The Godrej Properties stock is down 5 per cent since the beginning of this month, and 20 per cent since May on signs of slowing growth and whether the company can match the record sales it achieved in 2017-18.

In the June quarter, the company reported new bookings at ~8.2 billion, down 44 per cent over the year-ago quarter. The decline comes after four consecutive quarters of robust sales growth in which the property sold had doubled every quarter. The company had sold over a million square feet in each of the four quarters. Its core focus markets of Mumbai, NCR, Bengaluru and Pune.

One of the reasons for the lower growth has been delays in new launches. While some of the launches were in June, others were pushed to the September-quarter owing to the lack of approvals. In addition to this, the company's Thane project, Godrej Alive (2.1 million sq. feet), did not get higher bookings, given the lower footfalls and a longer completion timeline. A high base was also another reason for the decline as the base quarter saw three successful launches.

While the June-quarter bookings were lower, the launch pipeline continues to be strong, with company looking at the inauguration of nine new projects in the rest of the fiscal year. This includes four in Bengaluru, two in NCR, and one each in Kolkata and Bangalore. Analysts at JM Financial, however, observe that while the company plans to launch multiple projects in 2018-19 (FY19), limited Mumbai launches in the current fiscal year could be a key risk to its FY19 estimates of ~52 billion. However, despite the near-term hiccups, there have been some positives, including ~10-billion capital raising during the June quarter. The capital will help the company close joint development deals as well as opt for higher interest or buyout projects. Analysts say how quickly it executes its projects and tap new opportunities will be key, as the sector is still coming to terms with demand slowdown.

Despite the June-quarter miss, most analysts are bullish on the firm’s prospects, given low-debt and good execution track record so far, which will enable it to gain market share.