'Buy' Prestige Estates, Maintains HDFC Securities, But Lowers Target Price — Here's Why

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HDFC Securities Institutional Equities

Prestige Estate Projects Ltd. had a tough time navigating approval challenge, which resulted in weak 9M FY25 presale of Rs 100 billion versus Rs 230 billion of FY25 guidance. Whilst it may unnerve investors looking at short term, the land is not going anywhere and will eventually convert into a launch.

We had written earlier in our note ‘Approval challenges may play spoil sport’ about Bengaluru facing approval issues and the delay extended by one quarter. Approval scenario seems to be improving now, with RERA coming in for Prestige, Sobha and Brigade for their Bengaluru projects.

We believe that presales underperformance is more of approval delays rather than demand issue, and hence we expect quick presales recovery, with Prestige Estate likely achieving Rs 100 billion+ presales in Q1 FY26, driven by Rs 110 billion of Indirapuram project.

Prestige Estate annuity business has started gaining momentum with initial prelease tieup in BKC, Aerocity and Lakeshore projects. With the recent fund raise of Rs 50 billion, balance sheet is healthy and debt under control with net D/E as of Q3 FY25 at 0.37 times.

Prestige Estate has a well-diversified model with strong mix of annuity and residential asset class and Pan India presence. Prestige Estate moat lies in acquiring land at low cost and this helps to re-calibrate or offer better pricing to achieve sales velocity and better IRR’s.

We remain constructive with Buy rating and SOTP based target price of Rs 1,914/share. (adjusted for fundraise shares dilution).

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