2 Realty Stocks ICICI Direct Is Bullish On For Gains Over 20% In The Short Term

 

Phoenix Mills- 'Buy' for a target of Rs. 1020

ICICI Direct has maintained its ‘Buy' rating on the country's leading mall developer and operator, Phoenix Mills with a target of Rs. 1020, implying gains to the tune of over 21% from the last traded price of Rs. 840. The stock at the time of recommendation commanded a price of Rs. 867.95.

Drivers for future price performance of Phoenix Mills as noted by ICICI Direct

• Focus on core competence in the area of development and operation of retail malls in the country; under-development retail GLA of approximately 6 million sq ft to trigger growth.

• Retail rental income expected to grow in the medium term at a CAGR of approximately 16% to |Rs. 2175 crore in FY20-25E.

• Decline in Covid-19 cases and reopening of economies to fully operationalise its mall and hospitality asset; rentals and ARR to improve, added the brokerage report.

• Furthermore, strong balance sheet and strategic expansion proposals to add 1 msf of retail area annually.

For the just ended June quarter of FY22, the company's results got impacted owing to lockdowns. Revenue from both retail and hospitality fronts was dragged lower on a sequential basis in the range of 49-57 percent, while on a YoY basis hospitality revenues witnessed a good growth of 57%. Commercial segment turned out to be the strongest with revenue growth of 61% YoY.

Alternate stock Idea: Other than Phoenix Mills, ICICI Direct is positive on Oberoi Realty from the real estate segment. The brokerage firm recommends a ‘Buy' on Oberoi Realty for a target price of Rs. 830 as against the current trading price of Rs. 699, implying a potential upside of 19%. ‘Oberoi Realty is a quality play MMR premium real estate', adds the brokerage.

2. Brigade Enterprises-'Buy' for a target of Rs. 405/ share

ICICI Direct is bullish on the stock of South India-based property developer, Brigade Enterprises. The brokerage has set a target of Rs. 405 to be realized over a period of 12 months. The shares of the realty major that has a competitive edge owing to wide product base last traded at Rs. 328.1, implying gains of over 23%.

ICICI Direct values Brigade Enterprises at Rs. 405/scrip on below rationales:

• Sales is picking up in the residential business with strong pipeline of 18.1 mn sq ft ongoing projects and 1.9 mn sq ft upcoming projects.

• Stable cash flows in office leasing portfolio with traction in leasing to gain momentum over the medium term; normalisation in malls operation to provide further impetus.

• Hospitality portfolio recovery led by reopening of economy

In the just ended quarter, sales volumes of the company were hit on a quarterly basis. Revenues also saw a decline of over 50% on a QoQ basis owing to weak traction in hospitality and weak rental revenues.

Alternate Stock Idea: Besides Brigade, ICICI Direct likes Mahindra Lifespace in real estate space and calls it to be "A play on residential expanding real estate portfolio", the brokerage recommends buying the scrip for a target price of Rs. 940. The scrip last as on August 10, 2021 closed at Rs. 752.35 per share on the NSE.

(| crore)	FY19	FY20	FY21	5 yr CAGR (FY16-21)	FY22E	FY23E	2 yr CAGR (FY21-23E)
Net Sales	2972.8	2632.2	1950	3.10%	2744.7	3462.5	33.30%
EBITDA	789.7	663.2	471.9	-1.10%	723.1	1134.3	55.00%
EBITDA Margin(%)	26.6	25.2	24.2		26.3	32.8
Net Profit	239.9	130.6	-46.3	PL	46.1	308.2	LP
EPS (|)	11.4	6.2	-2.2		2	13.4
P/E(x)	29.4	53.9	NM		166.2	24.9
EV/EBITDA(x)	14.1	17.8	24		15	9.2
RoE(%)	11.1	5.7	-2		1.6	10.1
RoCE(%)	11.8	7.6	4.4		6.7	11.4

Disclaimer:

Note stock market investment is subject to risk. You need to analyse your financial goals, risk appetite, age etc. before taking plunge into the equities market. Further, the stocks listed in the report are for informational purpose only and need not be construed as investment advice.

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