Real estate stocks have been rallying for the past few days. The Nifty Realty index has rallied over 4% in the last five sessions as real estate developers reported strong updates for the quarter ending June 2022. However, so far this year, the index has tanked over 16 per cent, underperforming benchmark Nifty 50 which has corrected around 7%. India’s residential real estate segment recorded a 9-year high in terms of sales volume during the first half of 2022, according to global property consultancy firm Knight Frank. Shares of Oberoi Realty and Sobha may rally 32% going forward on the back of healthy sales momentum, projected Edelweiss Securities in its recent reports.
Sobha: BuyTarget price: Rs 858, Upside: 32%
Sobha clocked its best-ever pre-sales in Q1FY23, fuelled by a pickup in launches. Volumes rose 52% YoY. By value, pre-sales (company’s were at Rs 9.5bn, up 67% YoY, aided by higher realisation. Q1FY23 launches stood at 2msf (across three projects), eclipsing the FY22 launch figure of 1.7msf. According to the analysts at Edelweiss, revival in housing demand coupled with Sobha’s focus on cash flows and geographical expansion should hold it in good stead. Cash flow improvement is a key stock catalyst. “We believe Sobha would be a key beneficiary of robust tech hiring,” it said. Edelweiss Securities maintains buy call on the stock with an SoTP-based target price of Rs 858 per share share, on a par with its NAV of Rs 832 apiece for the residential business plus value of the contractual business at Rs 26 per share.
The company is looking to launch a Thane project soon. Analysts believe that this could boost its sales trajectory in the same way as the Elysian in Goregaon did. Considering Oberoi Realty had among the highest inventory levels among listed realty developers, this is a significantly positive development and bodes well for its future cash flows, the brokerage noted. “Revival in housing demand improving sales trajectory, inventory liquidation and a lean balance sheet underpin our bullish stance on the company. Traction in pre-sales and project launches can be a potential stock catalyst,” analysts said in the report. The brokerage factored in faster inventory liquidation, and expects management to focus on project addition to take advantage of rising demand. It maintains a buy call on the stock with a target price of Rs 1,049 per share.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)
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