Motilal Oswal's research report on Godrej Properties
During FY18-21, Godrej properties (GPL) launched (38) and delivered (20) 58 projects of which 30 projects were JV’s. Of these 30 projects, we analyzed the financials of 22 JV projects to understand the project-level economics and assess the trajectory of contributions from JV projects to financials of GPL. Below are the key takeaways a) recognition of overheads in ongoing projects without the corresponding revenue is dragging its profitability at the consolidated level, b) a large part of GPL’s profit is realized through interest arbitrage for a tax-efficient structure, c) GPL is reporting improved EBITDA margins for JV projects added post FY18.
Outlook
However, concerns over the company’s ability to strengthen its MMR portfolio and improvement in P&L profitability in near term still loom over. We retain our Neutral rating at an unchanged TP of INR1,300.
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