Buy Prestige Estates; target of Rs 900: Motilal Oswal

Motilal Oswal's research report on Prestige Estates

At the beginning of CY23, Prestige Estates (PEPL) was identified as our top pick for the year due to its robust launch pipeline, ensuring a significant expansion in the residential business. This not only offered visibility for growth but also allayed concerns regarding leverage. PEPL’s pre-sales grew ~25% YoY in FY23 on a higher base and followed it up with another strong performance in 1HFY24 with bookings of INR110b. Management now aims to achieve pre-sales of INR200b in FY24 and seems on track to achieve its presales target of INR250b by FY26. The stock has outperformed its peers and realty index with 53% YTD return. While net debt has increased by INR25b since Sep’22 to INR65b as of Jun’23, driven by aggressive business development initiatives, the scale up in the residential segment will limit the rise in leverage, ensuring it remains at comfortable levels. We expect net debt to peak out at INR90b in FY25. We increase our TP to INR900 and reiterate our BUY rating.

Outlook

We reiterate our BUY rating with a revised SOTP-based TP of INR900, implying a 23% upside potential.

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