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.
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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