2 Brokerages Initiates A Buy On This Mid-Cap Real Estate Stock For Potential Gains

Two prominent stock stock broking firms, Motilal Oswal and HDFC Securities have given a buy rating on the stock of Prestige Estates. Both firms see significant potential gains of roughly 40% and 28.68% respectively.

The company recorded a strong strong quarter with presales of Rs 39 billion. For FY24, it expects to achieve 25% growth in annual pre-sales over FY23. It expects to achieve this on the back of a strong launch pipeline of 76msf with higher contribution expected from Mumbai MMR and Hyderabad along with Bengaluru (sales of which was subdued on account of lower new launches).

In two significant transactions, Prestige Estates has acquired the balance stake in BKC and Mahalaxmi project from DB Realty for Rs 9/2 billion respectively.

The company has recently declared a dividend of 15% and also would issue non-convertible debentures, intimated through securities exchange filing on May 30.

Motilal Oswal suggests a target price of Rs 675 (Upside potential of 37.87%)

Motilal Oswal believes that Prestige Estates has scaled up its residential business remarkably to Rs 129 billion in FY23 from Rs 55 billion sales in FY21 and the management remains confident of achieving 25% YoY growth in bookings in FY24. Thus, the broking firm raises its FY24/FY25 pre-sales estimates by 23%/37%.

While the recent stake increase in key office assets in Mumbai has increased net debt. Once the commercial portfolio reaches full stabilization over the next five to six years, it is expected to generate a rental income of Rs 40 b. However, this potential income is not fully reflected in the current valuation.

"We reiterate our BUY rating on the stock with an unchanged target price of Rs 675, implying an upside potential of 40%."

HDFC Securities suggests a target price of Rs 630 (Upside potential of 37.87%)

According to the HDFC Securities research note, for the BKC project, Prestige Estates expects an increase in rental from Rs 325 psf pm to Rs 350 psf pm and cap rate compression to 8% from 9.5%(at the valuation stage). These two factors are expected to provide a valuation upside potential of Rs 35 bn.

"To maintain the growth momentum, Prestige is targeting residential BD of Rs 200 bn annually and may launch its first project in NCR subject to timely approvals. We maintain BUY, with an unchanged SOTP-based target price of Rs 630/share.", the broking firm added.

Dividend & Non-Convertible Debenture Details

The Board of Directors at their meeting recommended payment of the final dividend at 15 % (Rs 1.5 per share) on the equity shares of the company for the year ended March 31, 2023, subject to the approval of shareholders at the ensuing Annual General Meeting of the company.

No details of the record date and or book closure details were shared by the company yet.

Additionally, the board even approved the issuance of non-convertible debentures for an aggregate amount of up to Rs 2000 crores on a private placement basis.

Share Price Movement

The latest closing price of this mid-cap real estate stock is Rs 490.85. It marginally increased by 0.63% over the previous day's closing price. In the last one year, the stock has rallied by 10.28% while over three years, it has soared up by 197.21%.

Disclaimer

The stock has been picked from the brokerage reports of Motilal Oswal and HDFC securities. Greynium Information Technologies, the author, or the brokerage house will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.