Morgan Stanley is bullish on Godrej Properties Ltd. and Prestige Estates Projects Ltd. on strong momentum in the current financial year. The brokerage is positive on the overall volume and price outlook in the residential market. However, the guidance will likely be conservative at the start of the fiscal as it expects the first quarter to be slower due to delays in launches related to real-estate-regulatory-authority approvals.
The March-quarter pre-sales numbers for Godrej Properties more than doubled and was up 16% for Prestige Estates, which was aided by meaningful contributions from previously launched projects, it said in a report on April 10. "We prefer companies with higher pre-sales growth (Prestige/Godrej) versus lower growth (DLF/Oberoi)."
The brokerage has an 'overweight' rating on Godrej Properties and Prestige Estates but is 'underweight' on Oberoi Realty Ltd. and Mindspace Business Parks REIT.
Morgan Stanley On Prestige Estates Projects
Residential segment is valued at 25 times the price to earnings, which compares well with the long-term average.
Expects pre-sales to record a 33% compound annual growth rate over fiscal 2023–26.
Risks to upside include steady pace of new launches, scaling up in non-Bengaluru markets and rental growth.
Slowdown in the IT industry, slow new launches and delay in execution of ongoing projects may be downside risks.
Morgan Stanley On Godrej Properties
Price target is derived by valuing the residential business at 25 times the P/E.
For fiscals 2024 and 2025, pre-sales are estimated to grow 60% and 20% year-on-year respectively.
Aggressive new-project acquisition and steep price increases are likely upside risks.
Delay in new launches, slow execution of ongoing projects and weak sales velocity are downside risks.
Morgan Stanley On DLF
It values the residential business by applying a 30-time P/E multiple.
Faster monetisation of unsold inventory and new-project additions will act as upside risks.
Slow sales momentum amid ongoing sluggishness in the National Capital Region markets and slow pace of land bank monetisation can be downside risks.
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