Sobha, Mahindra Life, Prestige Estates, Brigade & Macrotech Developers: Motilal Oswal sees up to 58% upside on these realty stocks

Motilal Oswal, in its latest report, has given a 'Buy' call to eight out of nine select real estate stocks; three of them being large-caps and five small-caps. For one stock, it recommended a 'Neutral' rating. In the case of large-cap real estate stocks, the brokerage assigned a pick-up call for Macrotech Developers, Oberoi Realty and Godrej Properties with a potential upside of up to 37 per cent. For the mid-cap realty counters, Motilal advised acquiring Sobha, Mahindra Lifespace, Prestige Estates, Brigade Enterprises and Phoenix Mills while expecting a jump of up to 58 per cent.

For Sobha, the brokerage has a target price of Rs 700 over a 12-month period, which is 58 per cent higher than the calculated price of Rs 444. Mahindra Lifespace and Prestige Estates have a 50 per cent potential upside, each, Motilal said. It also suggested that Brigade Enterprises and Phoenix Mills could surge 49 per cent and 31 per cent, respectively.

Macrotech Developers, Godrej Properties and Oberoi Realty could gain up to 37 per cent, as per Motilal. DLF is the only stock in the select pack which has a 'Neutral' rating.

"Inventories across most of the companies under our coverage universe have declined to below 12 months as absorptions have exceeded launches over the last six quarters. We thus expect launches for our coverage universe to pick-up in Q4 FY23 to a multi-quarter high leading to 42 per cent YoY growth in pre-sales. Operational update reported by a few companies indicates a pre-sales growth of 12 per cent/11 per cent YoY in Q4 FY23/FY23," Motilal stated.

With a surprise pause by the Reserve Bank, the interest rate would unlikely be a dampener on demand from hereon and we expect the industry to grow at 5-10 per cent, the brokerage added.

"We expect absorptions for top-8 cities that have remained flat since the last five quarters to come back on a growth track. Since affordability has sustained at healthy levels and inventory overhang still remains at a comfortable range, we expect gradual price hikes to continue. Hence, we reiterate our constructive outlook on the sector," Motilal further stated.

Macrotech Developer (Lodha), Prestige Estates and Godrej Properties are among the preferred stocks by the brokerage. Prestige, Sobha, Godrej properties and Brigade have witnessed a healthy drop in their unsold inventory levels, Motilal also noted.

Meanwhile, Indian equity indices extended their fall for the second straight session after a positive start. The domestic indices were pulled down today due to weakness in financials, consumer and energy stocks.

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