Godrej Properties shrugs off Q1 miss with new launches

Valuations at 100% premium to its NAV, however, factor in the demand uptick

The Godrej Properties stock has gained about 35 per cent in four trading sessions, hitting its all-time high in the process. The stock has been the biggest gainer among realty stocks over the last month, rising 49 per cent as against the 34 per cent gains of the Nifty Realty.

A strong demand for new launches has sparked a rally in real estate stocks, with organised players benefitting from market share gains and portfolio expansion. Rate cuts by housing finance companies are expected to fuel demand during the festive season.

The near-term trigger has been the announcement that the Godrej Woods project in Noida, UP, achieved sales of ~575 crore in one day after the launch of the project’s second phase. The company has sold 340 homes with an area of more than half-a-million square feet. Total sales in the project over the last six months has crossed ~1,100 crore.

Strong demand for new launches was a key trigger for the stock given its muted performance in the June quarter (Q1). In Q1, it achieved gross sales bookings of ~500 crore, down 68 per cent over the year-ago quarter and 88 per cent sequentially.

The dip was on account of the second wave of Covid-19. The management had indicated a pickup in sales with four to five launches in Q2 — two in the National Capital Region (NCR) and one each in Bengaluru and Pune.

Despite the sales miss in Q1, ICICI Securities expects the company’s sales bookings to hit ~7,220 crore in FY22, a 7 per cent increase year-on-year (YOY). This rise, according to Adhidev Chattopadhyay of ICICI Securities, would come on the back of 21 launches in FY22 spread over 13.3 million square feet and excludes the Bandra/worli projects in Mumbai. He expects the company to clock annual sales bookings of over ~10,000 crore each in FY23/24, subject to the launch of high value projects in the Mumbai Metropolitan Region and NCR.

Given the launch pipeline, its sizeable presence across key markets, and ongoing consolidation, analysts believe the company will be among the key beneficiaries in the realty space. Samar Sarda of Axis Capital says Godrej Properties has stood out, benefitting the most from industry consolidation and aggressive growth strategy. Its expansion in various markets has led to market share gains.

While near-term sales volumes should remain strong, valuations are at a 100 per cent premium to its net asset value and price to book at over 6 times after the recent runup. Investors should await a correction before considering the stock.