Brigade Enterprises hits three-month high; surges 36% in two months

The stock was up 6% at Rs 220, its highest level since September 11, 2018.

Shares of Brigade Enterprises hit a three-month high of Rs 220 per share, up 6% on the National Stock Exchange (NSE) in an otherwise market after the brokerage firm Motilal Oswal Securities initiates coverage on the stock with a Buy rating and 12-month target price of Rs 282.

The Nifty 50 index was trading 0.58% lower at 10,602 points at 12:47 pm. The stock of was trading at its highest level since September 11, 2018.

In past two months, the stock of real estate company has outperformed the market by surging 36%, after it reported 8% year-on-year (Y-o-Y) growth in its consolidated net profit of Rs 680 million in September quarter (Q2FY19). Total revenue grew 19% at Rs 8.44 billion on Y-o-Y basis. EBITDA (earnings before interest, tax, depreciation and amortization) margin improved to 29% from 27% in the year-ago quarter.

Brigade Enterprises said it is planning to launch about 10 to 12 million square feet (msf) of space in H2FY19. Of this, about 8 to 9 msf will be in the residential segment and about 3 msf will be in the office and retail segment.

Previously a predominant residential player, it is now focusing on increasing its leasing and hospitality business, which analyst believes can act as a key growth catalyst.

“Brigade Enterprises appears all set for a tactical shift in its portfolio, with a clear focus on scaling up the high-potential leasing business. The company aims to add around 4 msf of leasable area to its portfolio over the next five years. Consequently, we expect a leasing income CAGR (FY18-22) of 27% to Rs 6 billion (up by a significant 2.6x from FY18 levels),” analysts at Motilal Oswal Securities said in a report.

In hospitality, the company is on track to increase the number of keys from 978 in FY18 to 1,637 by FY21, strengthening earnings prospects. We expect EBITDA to increase from Rs 589 million in FY18 to Rs 1,068 million in FY21 (22% CAGR), also supported by scale-up of new hotels, the brokerage firm added. It initiated coverage on the stock with a Buy and a target price of Rs 282 – an upside of 37% on Monday’s closing price of Rs 206.