Shares of Godrej Properties Ltd. declined as much as 2.9 percent intraday on Tuesday, after Morgan Stanley downgraded its rating on the stock to ‘Equal-weight' from an earlier ‘Overweight', citing recent run up and rich valuations.
The Mumbai-based property developer has risen over 69 percent so far this year. It currently trades at 38 times one-year forward earnings, compared to its five-year average of 37.5 times, Bloomberg data showed.
The broking firm pegged its target price at Rs 475 per share — around 9 percent lower than Monday's closing price. It arrived at the price after applying a 15 percent discount to the company's net asset value. Subsequently, the brokerage house revised their earnings per share estimates downwards by 13 percent for fiscal year 2018.
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Morgan Stanley said the stock has priced in the upcoming launches/pre-sales and has also factored in potential benefits from improving macroeconomic conditions.
Upside Triggers
- Large project additions to its portfolio
- Faster monetisation of the company's land in Vikhroli
- Faster execution and monetisation of The Trees project in Vikhroli (east) and the commercial project in Bandra Kurla Complex in Mumbai
Downside Risks
- Slowdown due to implementation of Real Estate Regulatory Authority (RERA) or Goods and Services Tax (GST)
- Delay in new launches
- Delay in monetisation of commercial inventory
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