Godrej Properties eyes strong growth on robust demand, new launches

The stock has gained 56 per cent over three months on consecutive quarters of high bookings

The stock of Godrej Properties (GPL) has been hitting fresh 52-week highs on the back of strong bookings or pre-sales, expanding portfolio and expectations that its growth momentum will continue in FY24. The company posted its highest sales bookings in the March quarter at Rs 4,000 crore which was up 25 per cent on a y-o-y and sequential basis.

This was the second consecutive quarter of record bookings with orders coming from across projects and no project contributing to more than 10 per cent of bookings. The record sales were aided by 7.6 million square feet of launches in the quarter which accounted for 60 per cent of the sales in Q4. Helped by 5.3 million square feet of sales, which was up 24 per cent y-o-y, the company ended FY23 with overall volumes of 14.8 million square feet.

For FY23, the company beat its guidance of Rs 10,000 crore ending the year with bookings of Rs 12,230 crore, which was 56 per cent higher than FY22. The company has guided for a pre-sales growth of 14 per cent y-o-y for the current financial year to about Rs 14,000 crore. Jefferies Research expects it to achieve the FY24 target given the launch pipeline of 20 million square feet and unsold inventory of 12 million square feet.

Even as it has increased its business development efforts, the net debt to equity has remained under control. GPL spent Rs 1,970 crore for land and approvals which resulted in a cash burn of Rs 1,000 crore. Net debt increased to Rs 3,600 crore with net debt/equity at 0.39 times during the quarter. “While GPL remains positive on funding new project acquisitions through internal accruals, it also has significant headroom on debt as the current gearing ratio is lower than the target of 0.5 to 1 times,” say Pritesh Sheth and Sourabh Gilda of Motilal Oswal Research. In May, the company’s board had approved the raising of funds of up to Rs 2,000 crore. The brokerage has a buy rating and believes that the expected improvement in delivery and profitability can further re-rate the stock.

A positive for the company is the strong operating cash flow. Collections in the March quarter stood at Rs 4,300 crore, up 49 per cent y-o-y. Abhinav Sinha of Jefferies Research says that the year-end surge in sales and deliveries led to customer inflows rising 49 per cent y-o-y helping drive operating cash flows to Rs 2,250 crore. GPL has a target of 12 per cent growth in customer collections to Rs 10,000 crore for FY24.

While the stock has run up sharply over the last three months, Jefferies Research had, in a May 3 report, indicated that the stock offered a good entry point as it traded below the 10-year average price to book value. The stock is up 19 per cent since that report and is up 56 per cent over the past three months. Sustained sales and collections are key for further gains in the stock.