Reiterate ‘buy’ on Godrej Properties with TP of Rs 1,974

Strong rankings in leading metros provide gearing to the up-cycle.

Godrej Properties’ (GPL) new launches have picked up in the second quarter, which should help drive a strong quarter-on-quarter (QoQ) pickup in sales. News flow on the capital deployment has yet to come through, though competition for large deals is still low and GPL’s financing capacity is among the best.

We believe GPL’s strong positioning (Top-4 in Bangalore, Pune, NCR) would provide it good leverage to the housing cycle uptick. We reiterate Buy with a target price of Rs 1,974.

GPL’s new launches (6.9m sf) have significantly trailed sales (11.6m sf); leading to depleted inventory and consequently weaker sales in Q1. The management had guided for new launches resumption from Q2. Our channel checks suggest GPL’s launch momentum has indeed picked up with new launches done across the four key micro-markets in Q2.

Per our checks, the projects launched include — Ananda, Bangalore (0.7m sf); Hill-Retreat, Pune (0.5m sf); Woods Phase-2, Noida (0.8m sf) and new tower releases in City, Panvel, etc.

GPL had already highlighted improved sales momentum with July sales at Rs 490 crore (98% of Q1) and consequent expectations of a strong Q2. As new launches come through, we believe, the July momentum has likely sustained.
Overall, for FY22, GPL has a 13.3m sf new launch pipeline and if 8-10m sf of the same gets launched (~60-75% of target), pre-sales could rise in double digits in FY22. The demand remains strong across markets and as such new launches are likely to see high sell-thru rates.

Strong rankings in leading metros provide gearing to the up-cycle. The recent excitement around tech/startup boom (link) driving housing sales in tech-driven cities; or our belief (link) of NCR being among cyclically best-placed market could well be played through GPL.