Motilal Oswal's research report on Godrej Properties
Godrej Properties (GPL) reported a four-fold jump in sales bookings to ~INR80b during FY17-22, driven by over 100msf of project additions. GPL’s market share expanded to 8% in CY22 from 2% in CY16 and it was one of the biggest beneficiaries of industry consolidation. With a strong visibility on consolidation, GPL raised ~INR68b over FY19-21 but a large part of it remained undeployed until FY22. While the company reported a strong scale-up in project pipeline and sales bookings, subdued profitability and declining OCF trend failed to justify its premium valuation. In Jan’22, we initiated coverage on GPL with a Neutral rating, citing: (1) its expensive valuation, which incorporated strong business development and (2) no near-term catalysts for improvement in profitability, which has remained a key concern. The stock has corrected ~40% since then and with record project additions (GDV of ~INR300b) in FY23, the valuations have become attractive. During our recent meeting with GPL's management, Mr. Pirojsha highlighted that strong business development momentum is expected to continue in FY24 and the company remains on track to deliver improved profitability.
Outlook
We estimate that the company could deliver 38msf of projects over the next two years, and the improved profitability will be one of the key re-rating triggers. We upgrade the stock to BUY with revised a TP of INR1,575 implying 40% potential upside.
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