Shares of Prestige Estates Projects Ltd. surged on Friday after CLSA raised its target price, citing substantial operating cash flow supporting capex and project pipeline growth. The brokerage raised the target price from Rs 1,875 per share to Rs 2,320 per share. This implies a 23.7% upside from Thursday's closing price.
The brokerage has also retained its 'buy' rating on the stock. "Prestige Estates has been among the top two developers in terms of pre-sales over the past two years. However, the stock still trades at a significant discount to peers, despite the outperformance YTD," CLSA said.
Shares of the company jumped 6.7% on Friday, before paring gains to trade 2.86% higher at 12:51 p.m. The stock has risen 221.48% in the last year.
Key Levels
Support level: Rs 1,802.35 per share (one-week low).
Resistance level: Rs 1,998 apiece (life-high).
CLSA On Prestige Estate
Debt level will be comfortable with interest cover of 4.5-5.5 times over the medium term. Potential demerger and listing of Prestige's hotel portfolio could aid in managing debt, according to CLSA.
The company is scaling up significantly, targeting rental income to grow 5 times over the next four years and presales growth of 25-30% per annum, it said. "We believe its operating cash flow will substantially support its capex and project pipeline growth."
However, lower project pipeline compared to its peers impairs presales growth visibility, the brokerage said.
Increase in leverage due to high planned capex and spend on new land is another risk, it said.
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