Buy Prestige Estates Projects; target of Rs 611: Geojit

Geojit's research report on Prestige Estates Projects

Prestige Estates Projects Ltd (PEPL) is India’s largest developer in terms of booking value for FY22. Much of PEPL’s growth is fueled by the projects in Bengaluru and Hyderabad. The company has embarked in to Mumbai and NCR region, and targeting aggressive growth in these geographies. Pre-sales increased from 1.1 msf in Q1FY22 to 3.6 msf in Q1FY23(+230% YoY) and we expect these healthy sales to continue. Management expects total annuity income to reach Rs. 1,000 crores in the next 2-3 years, up from Rs. 250 crores now, and to triple in the long term. Hospitality segment witnessed a turn around(-49% EBITDA margin in Q1FY22 vs +35% in Q1FY23), aided by new additions and higher operating margins. We expect this trend to continue given opening up of economy and strong uptick in tourism & travel. Real estate is on a healthy base, led by strong demand and higher realisation. Declining inventory levels and softening commodity prices are expected to outweigh rising mortgage rates. We have a positive view on PEPL on the back of strong projects under pipeline(46 msf), strong pre-sales momentum and a healthy balance sheet (debt-to-equity of 0.40).

Outlook

Hence, we assign BUY rating on the stock with a target price of Rs. 611 based on 2.3x FY24E adj. book value.

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