Brigade Enterprises likely to stand tall on robust launch pipeline

FY24 saw a strong show in all its key segments - residential real estate, rentals and hospitality

The stock of Bengaluru-based realty major Brigade Enterprises is up 16 per cent over the last three months, even after Friday’s fall, led by a decline in the broader markets.

The gains came on the back of record sales in the last quarter, strong pipeline of launches, improved leasing and a robust booking guidance for FY25.

After its Q4 FY24 results and multiple launches, the company saw a slew of upgrades.

What stood out both in the March quarter and FY24 was a strong show in all its key segments — residential real estate, rentals and hospitality.

Led by improved pricing in launched projects, a robust 6.18 million square feet of new launches and strong sales traction, the company ended FY24 with its highest-ever bookings of Rs 6,013 crore.

This was 46 per cent higher than the year-ago quarter.

While volumes were up 19 per cent year-on-year (Y-o-Y) to 7.55 million square feet, average realisation grew 23 per cent Y-o-Y to Rs 7,968 per square feet.

Given the strong demand, the company seeks to take its four quarter launch pipeline to 12.6 million square feet (double of last year) with a gross development value of Rs 13,000 crore.

The company expects its pre-sales growth at 30 per cent for FY25.

Antique Stock Broking expects the company to witness strong growth if all planned projects are launched as scheduled.

“Although realisation is expected to grow due to price escalation as well as premiumisation of products, sales absorption may not be as high as it was in FY24. This is due to premiumisation and likely spillover of launches towards the end of the year,” said Biplab Debbarma of the brokerage.

Rental revenues for the March quarter, too, saw a growth of 25 per cent Y-o-Y to Rs 938 crore while operating profit for the vertical was up 27 per cent to Rs 684 crore on better occupancy.

The performance of the company in the second half of FY24 was led by regulatory tailwinds.

Its assets in special economic zones saw better demand in leasing following floor-wise denotification and strong demand from global capability centres.

The company saw a net leasing of 1 million square feet last year with blended occupancy touching 97.5 per cent. Footfalls were healthy in the retail space, led by food and beverages, fashion and family entertainment.

The company expects revenues to improve in Q2 FY25 given the commissioning of Brigade Twin Towers with an area of 0.66 million square feet.

Aided by an increase in occupancies and average room rates (ARR), the hospitality segment saw 18 per cent growth in revenues to Rs 464 crore. While ARRs grew 8 per cent to Rs 6,480, average occupancies saw a 3 basis points (bps) increase to 72 per cent.

Operating profit improved by 43 per cent and margins expanded by 641 bps to 36.3 per cent. The company is eyeing an expansion of its portfolio of 1,474 rooms by 1,000 in the medium term.

Amit Agarwal and Rishith Shah of Nuvama Research expect robust growth on healthy domestic demand, revival in foreign tourist arrivals, meetings, incentives, conferences and exhibitions (MICE) and portfolio expansion.

The brokerage has maintained its buy rating and upgraded the target price to Rs 1,496 a share based on 1.4 times FY25 net asset value.

The buy rating is on account of a robust launch pipeline and improving occupancy in hospitality and leasing segments, which will ensure sustainable growth.

Antique Stock Broking also has a buy rating with a target price of Rs 1,439 a share.

The company’s increasing footprints outside the home market of Bengaluru (Chennai and Hyderabad), coupled with a strong residential launch pipeline of 12.6 million square feet, gives it strong growth visibility. This, coupled with improved leasing traction and low vacancy of its rental portfolio, drives optimism for its upcoming rental assets of 6.33 million square feet, says the brokerage.