Jefferies bullish on Godrej Properties, expects 35% pre-sales growth in FY25

Foreign brokerage Jefferies remained bullish on Godrej Properties, expecting the realty major to post 35% pre-sales growth in FY25 to ₹30,000 crore. The agency has maintained 'Buy' rating on the Mumbai-based real estate major, with an unchanged price target of ₹3,750, indicating an upside potential of 32% from the current market price.

In upside scenario case, the agency expects Godrej's stock to rise up to ₹4,000, up 41% from the current level, citing that improvement in reported profitability and strong cashflow generation can all be helpful for its valuations.

In downward scenario case, Jefferies sees the stock to slip to ₹2,500, down 12% from the current level, saying that slower-than-anticipated sales growth, longer-than-expected timeline for new launches, and a rise in interest rates can drive both sales underperformance and lower multiples.

On Tuesday, Godrej Properties shares rose as much as 2.4% to ₹2,910.15 on the BSE. Early today, the realty heavyweight opened higher for the second straight session at ₹2,872.25, up 1% over the previous closing price of ₹2,841.90.

At the time of reporting, shares of Godrej Properties were trading marginally higher at ₹2,847.25, with a market capitalisation of ₹85,755 crore. The stock is down 16% from its 52-week high of ₹3,400 touched on July 16, 2024, while it has risen 52% against its 52-week low of ₹1,863.50 hit on December 21, 2023.

At the current level, the stock is trading higher than 20 days and 200 days moving averages, but lower than 5 days, 50 days, and 100 days moving averages. In the last one year, the largecap stock has risen 48%, while it has climbed 42% in the calendar year 2024. In the past six months, the counter has given flat return, whereas it added 6% in a month.

Analysts at Jefferies opine that Godrej Properties is the main beneficiary of ongoing property sector consolidation and a residential real estate cycle upturn. “We believe that its strong execution and brand name, nationwide model, and balance sheet advantage make it well-placed to acquire new projects on attractive terms. While immediate profitability may not be visible, partly for accounting reasons, the underlying franchise build is very solid.”

The report highlighted that the project acquired by Godrej Properties over the past 4 years have provided 8x multiple to acquisition cost and sales to quadruple. “While asset prices have since risen, GPL's pivot to owned land and the recent equity raise serve to extend the growth and CF jump horizon,” it noted.

Godrej Properties recently raised ₹6,000 crore, more than 50% of net worth as of Sep'24 and an equity dilution of 8% through a fresh share issue. The company intended to use fund proceeds for building project pipeline to scale up the business.

“We note that since its previous equity raise of ₹3,750 crore in 2021, GPL has deployed ₹8,000 crore of capital (equity & debt), alongside surplus CF redeployment (₹2,000 crore, post tax and interest), into projects worth ₹80,000 crore+ in GDV. FYTD25, GPL has already added projects worth ₹23,000 crore, surpassing guidance of ₹20,000 crore for FY25 (FY24 additions -₹22,500 crore), and we believe the capital raise would help to accelerate the same,” the report highlighted.

The agency believes that the equity raise will provide further headroom to accelerate the launch pace, as acquisition war chest is now large (gearing <0.2x).

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