Aurum PropTech: DART initiates coverage on the stock with ‘BUY’, sees over 68% upside - 5 key reasons why

Proptech companies, leveraging innovative technologies and tailored solutions for the real estate industry, have now gained significant prominence due to their vast potential market and increasing digitisation preferences among consumers.

Brokerage house DART believes that Aurum PropTech (AURUM), is one such new-age technology company, that will emerge as an influential game changer in India’s solid proptech growth momentum. It has initiated coverage on the stock with a ‘BUY’ rating and DCF-based target price of ₹250, implying an over 68 percent potential upside.

This will be led by its strong market positioning, comprehensive portfolio of new-age platforms/products, and end-to-end mapping of consumer needs along the lifecycle, it said.

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DART expects a revenue CAGR (compounded annual growth rate) of 46 percent over FY24-FY27E for the firm along with PAT profitability in FY27E.

Stock Price Trend

The stock has gained 29 percent in the last one year and over 15 percent in 2024 YTD. It has given negative returns in 3 of the 5 months so far. The stock lost 2.3 percent in May after a 19.5 percent rise in April. It also shed 7.5 percent in March and 10.2 percent in February, however, rose 21.3 percent in January this year.

Currently at ₹145.05, the stock is over 22 percent away from its record high of ₹186.55, hit on January 19, 2024. Meanwhile, it has advanced 36 percent from its 52-week low of ₹106.65, hit on May 24, 2023.

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Investment Rationale

Diverse and Robust Revenue Generation Streams: As per the brokerage, Aurum's diverse products and solutions are well-positioned for substantial growth, driven by increased housing demand, formalisation of the rental market, and the rising popularity of co-living spaces. It anticipates co-living and property management platforms, HelloWorld and Nestaway, to achieve 43 percent and 64 percent CAGR, respectively, from FY24 to FY27, while SaaS platform K2V2 and analytics solutions are expected to deliver 33 percent and 53 percent CAGR over the same period.

Additionally, Aurum has significant potential in its smaller-scale ventures like WiseX (fractional ownership), Integrow (asset management), The House Monk (property management software), and Aurum InstaHome (home valuation). Currently, these account for just 9 percent of FY24 revenues but have the potential to each exceed ₹100 crore in the near term, it predicted.

Furthermore, Aurum's strategic focus on growth and unit economics, along with industry consolidation and supporting weaker peers, positions it well for market leadership and investor attraction, added DART.

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Turnaround Specialist in Difficult-to-Crack Rental Space: Aurum has achieved significant growth over the past two years, primarily through acquiring rapidly expanding businesses. Key turnarounds include:

Achieving break-even in Nestaway within three-quarters of acquisition, with 75 percent occupancy. Growing HelloWorld's revenue by 87 percent YoY in FY24 (ARR of ₹130 crore), increasing active bed capacity from 9.6K to 13.5K, and reducing operational losses over two years.

Unlike peers such as NoBroker, Housing.com, and Stanza Living, Aurum has successfully reached positive unit economics and operational profits, noted DART.

EBIDTA and Margins: DART expects strong growth kicking in the company and sees healthy gains in profitability metrics. Given continued hyper-growth momentum, evolving business mix, and right scaling of the business, it also expects EBIT margins to improve systemically over the next couple of years. “We expect operating margins to improve sharply from -32 percent in FY24 to turn profitable by FY27 (5.1 percent), which in-turn should drive PAT profitability as well,” it said.

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Aurum May Report Positive PAT in FY27E: Aurum posted a PAT loss of ₹55.8 crore in FY24. The brokerage expects sustained investments and scaling up all the business would mean persistent higher expenditure over the next 2-3 years which would ease out starting FY27E wherein it sees the firm turning meaningfully PAT positive.

Positive Cash Flow: While Aurum has started posting positive operating cash flow from FY24 itself, investments pertaining to the acquisition of leased assets, particularly in HelloWorld, will continue to weigh on FCF (free cash flow) generation, while maintenance capex is expected to be minimal. It expects Aurum to deliver positive FCF generation from FY27 onwards.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.