Motilal Oswal starts coverage on Kolte Patil Developers with 'buy' call, sees 34% upside

"The company now has a robust project pipeline and ample balance sheet capacity to target new projects and maintain growth. It aims to achieve a pre-sales CAGR of 25 percent in the medium term," noted Motilal Oswal.

The company's project pipeline is around 33 msf, which includes 3.5 msf of ongoing inventory, 11.5 msf of upcoming projects, and 18 msf of future pipeline.

Motilal Oswal said that the company has often focused on maintaining a strong cash flow and revenue growth. Over the past few years, this has resulted in Kotle Patil seeing a steady stream of post-tax operating cash flow of Rs 400-500 crore over the last four years.

Kotle Patil has been vocal about its aggressive project addition strategy, which is taking shape as the developer acquired 6 msf of projects with a revenue potential of Rs 5,4oo crore, equally split between Pune and MMR, over the last 18 months.

Motilal Oswal indicated some key risks to the upside would be any possible inability to add new projects as intended, which will hurt future
growth. If the demand momentum sees a slowdown, it will lead to a reduction in the brokerage's pre-sales estimates and also a reduction in spending on new project additions.

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