Realty share price target

We recommend HOLD with a DCF based target price of Rs 376 (7% upside).

In Q3FY21, we expect construction companies to return to topline growth driven by near optimum labour availability, pick-up in execution. For real estate companies, key highlight will be strong residential sales volumes growth led by factors like pent up demand, benign interest rates, measures like stamp duty cut in Maharashtra. However, financial numbers of real estate companies will look optically weak due to rental waiver in retail...

IPO NOTE

Real estate players (like all major sectors) have faced the brunt of Covid-19, which is apparent from the stocks having seen a sharp correction in the past month. Segment wise, mall developers would be the first casualty with closure of malls and invocation of Force Majeure by at least some tenants. Similarly, home buyers' demand as well as construction stoppage will impact the residential segment. On the other hand, office segment cash flows remain protected. We expect the ground level situation to remain operationally challenging for all companies in our coverage universe amid...

Top Picks: DLF and Sobha The NIFTY Realty index has delivered ~21% returns over the last 3M, largely driven by DLF delivering 58% returns. Whilst residential markets remain muted, cap rate compression has started reflecting in stock prices. Though there is a marginal recovery in the premium segment viz. Gurgaon for DLF and in pockets of Mumbai, the overall sentiment still remains muted.

The cogs of this flywheel include (a) Real estate choices (we mapped networks across income profiles and population density of 460+ districts), (b) Assortment/mix and pricing (across 1,50,000 SKUs), (c) Financial position of 40+ retailers. Despite the huge opportunity, food & grocery (F&G;) and Apparel exhibit divergent trends. While F&G; is consolidating, Apparel is gradually fragmenting. Both trends make it imperative to identify whos got the proverbial flywheel (momentum) moving.

Top Picks: DLF and Sobha. The NIFTY Realty index has corrected 12.1% over the last 3 months. Weak property buying sentiments, high unsold inventory and paucity of new launches has impacted 2QFY20 pre-sales. As we enter into the festive season, new launches have picked up. We believe that discounts/sales promotion will speed up ready inventory monetization. We remain constructive on volumes with muted expectation on pricing power.

5 September 2019 OBER has completed the Thane land acquisition by paying INR8.9b to GSK for a 60-acre land parcel with development potential of 10-12msf. According to management, 20-25% of the developable area will be allocated for affordable housing (AFH). The first phase of the project is scheduled for launch around Diwali this year (end- Oct) it will more likely be under AFH with a ticket size of INR12-15m. We expect good response to the project based on our catchment analysis (detailed project is likely to be rolled out close to Diwali. We expect Thane and Goregaon launches to substantially boost volumes velocity to ~1.6msf in FY20, double of 0.8msf in the previous year. Oberoi Realty Annuity portfolio revenue increased by a robust 33% to INR3.1b in FY19. Revenue from retail grew backed by renewals while growth in office portfolio increased due to higher occupancy in Commerz II. We expect annuity portfolio CAGR of 47% to INR14.