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Motilal Oswal Report
India's listed real estate developers are continuing to gain market share amid a "K-shaped" trend in the housing market, where larger and branded players are outperforming smaller peers, according to a recent report by Motilal Oswal Financial Services .
The brokerage believes the ongoing consolidation in supply and absorption, coupled with regional diversification and stronger balance sheets, positions leading developers for sustained growth over the next few years.
Valuation and view
Due to the broader weakness in print related to demand, investor concerns about the sustainability of the upcycle have led to the compression of NAV premiums. Most players in the sector are now trading at a 10-35% discount to their respective NAVs.
Data indicate that although demand in the top eight cities has softened, branded developers have continued to grow amid a shakeout of smaller players.
Cash flows continue to remain healthy, and we expect strong FCF generation over the medium term.
The brokerage believe that the deep value in some of the prudent developers offers a compelling opportunity to generate superior returns.
Lodha (+29%; Buy) is Motilal Oswal's preferred pick among large players, whereas the brokerage also likes DLF (+19%; Buy).
Motilal Oswal remain positive on Godrej Properties (+16%; Buy).
Among the SMID players, Aditya Birla Real Estate (+39%; Buy) is it preferred pick, while Oberoi Realty (+3%; Neutral) is still trading at a premium to its residential NAV.
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