Buy Godrej Properties; target of Rs 333: Motilal Oswal

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Motilal Oswal's research report on Godrej PropertiesRevenue for 4QFY16 stood at INR5.2b (+22% QoQ), but margin declined to 10% (vs. 19% in 3QFY16), due to (a) Lower other operating income (high margin DM fees) and (b) Penalty of INR160m related to the legacy commercial project at Kolkata (Genesis). Additionally, a higher revenue contribution from the relatively lower margin BKC asset in 4QFY16 (34% vs. 19% in 3QFY16) acted as a drag. For FY16, revenue came in at INR26b (+43%), EBITDA at INR3.5b (+36%) and PAT at INR2.3b (+21%). The real estate market is witnessing a distinct polarization with the developers’ credibility and execution capabilities driving product marketability amidst subdued broader dynamics. GPL, with its brand recall and pan-India presence, is poised to benefit from the trend. The stock trades at industry premium valuations (FY17/18E P/B of 2.9x/2.5 vs. RoE of 12- 15%). Maintain Neutral with a target price INR333 (at NAV). Any major correction will offer an opportunity for entering the most resilient play in the real estate recovery cycle. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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