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Godrej Properties stock rises on market share gain hopes

On the flip side, sluggish activity in the luxury housing segment could weigh on the stock’s recovery

Shares of Godrej Properties Ltd have fallen about 25% from its pre-covid highs earlier this year. This is, however, better than the 35% drop in the Nifty Realty index. The street now anticipates an increase in market share for Godrej Properties, as a result of company-specific positives and government measures.

Godrej Properties, which has a relatively stronger liquidity position than its competitors, has launched deferred payment plans such as the 10:90 schemes, aiding fresh bookings. The company will also benefit from the temporary reduction in stamp duty in Maharashtra, given its exposure to the Mumbai Metropolitan Region and Pune. There are expectations that this will prop up sales of the affordable and mid-sized housing segments.

On the flip side, sluggish activity in the luxury housing segment could weigh on the stock’s recovery. This segment at present contributes 10-15% to the company’s overall revenues, according to analysts. Lately, Godrej Properties has widened its focus on the segment, but some analysts are worried about the current demand-supply scenario as it points to a dull near-term outlook for the segment.

in the pipeline
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in the pipeline

Oberoi Realty, which has a niche in luxury residential sales, sold only five units in the June quarter. This is significantly lower than its historical average run-rate of FY19 and FY20 of 87 units a quarter, analysts said.

Godrej, with its wide exposure and better use of online sales tools, did far better in Q1 and reported new sales of 1,530 crore, up 71% year-on-year. “Almost all the sales were via digital medium during the lockdown. Non-resident Indians accounted for around 50% of the bookings and the 10:90 payment plan helped," Edelweiss Securities Ltd analysts said in a note to clients.

“Though a more pronounced covid-19 rendered Godrej Properties’ Q1FY21 ordinary, it brought to the fore the latter’s ability and intent to push sales," analysts at Anand Rathi Securities said in a note.

The Godrej Properties Ltd stock is trading at a one-year forward price-to-earnings multiple of 56 times, according to Bloomberg data. The company may be better placed than some of its peers, but the sector is facing challenges and investors should thus be wary of high valuations.

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