Buy Prestige Estates Projects; target of Rs 675: Motilal Oswal

Motilal Oswal's research report on Prestige Estates Projects

PEPL stock has not seen any major re-rating despite continued strong performance in its residential business. In our opinion, this is likely due to concerns over leverage given a heavy capex cycle ahead of us. We expect CY23 to be a defining year for PEPL as it looks to grow its pre-sales on a strong base, provide growth visibility, and allay concerns of rise in leverage beyond a comfortable level. PEPL’s 25msf launch pipeline (over 12 months) and strong business development plans will provide clarity on further scale-up in residential business and robust cash flow generation. While PEPL continues its aggressive stance on commercial strategy, a large part of its capex is likely to be funded from internal accruals, capping the net debt at not more than 0.5- 0.6x of equity.

Outlook

We reiterate our BUY rating with a TP of INR675 and rate it as our top pick in real estate sector for CY23.