PremiumGodrej Properties reported muted earnings in the June quarter (Q1FY22) as the second wave of the pandemic derailed its sales momentum. In value terms, pre-sales fell 68% year-on-year and 81% sequentially to Rs497 crore. Collections declined 36% sequentially to Rs1,274 crore in Q1FY22.
There were no new launches in FY21 and sales were driven by existing inventory. Also, there were no business development deals in the quarter. Construction activities remained steady albeit at a slower pace, thus impacting project deliveries. The company completed just one project of 0.5 million square feet (msf) in 1QFY22.
Despite the disruption and delay, the company's management said that it was well on track with its launch pipeline and expects to launch around 13msf of total saleable area across projects/phases in FY22. Additionally, the company plans to construct a 1.05msf commercial project in partnership with Godrej Fund Management and is looking to acquire more such commercial projects. The company's management has guided for strong sales, exceeding Rs6,700 crore achieved in FY2021, for the remainder of FY2022.
In the backdrop of the significant earnings hit in Q1FY22, this looks aggressive, said analysts at Antique Stock Broking Ltd. The domestic brokerage house has reduced its pre-sales estimates by 14% for FY22 to factor in the impact of 1QFY22.
Another concern, according to analysts, is the company's elevated cash outflow. It's land and approval costs and advances to joint ventures remained elevated, resulting in net cash outflow of Rs344 crore. The company has an outstanding debt of Rs4,030 crore with net cash of Rs240 crore as on June 21.
Considering sub-par earnings and weak cash generation, analysts find the company's valuations expensive. "Improvement in margins, and better cash generation from extant projects would help justify the substantial premium (5 times price-to-book) on FY2023E) at which Godrej Properties trades at relative to peers," analysts at Kotak Institutional Equities said in a report.
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