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Business News/ Markets / Stock Markets/  Godrej Properties vs DLF: Which realty stock should you pick for long term?
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Godrej Properties vs DLF: Which realty stock should you pick for long term?

Over the past year, real estate market has seen a significant rise, with the realty index skyrocketing 125%. This surge can be attributed to strong pre-sales figures. Amid this environment, let's analyse between Godrej Properties and DLF, which stock has better long-term investment opportunities.

Over the past year, real estate market has seen a significant rise, with the realty index skyrocketing 125%. This surge can be attributed to strong pre-sales figures. Amid this environment, let's analyse between Godrej Properties and DLF, which stock has better long-term investment opportunities.Premium
Over the past year, real estate market has seen a significant rise, with the realty index skyrocketing 125%. This surge can be attributed to strong pre-sales figures. Amid this environment, let's analyse between Godrej Properties and DLF, which stock has better long-term investment opportunities.

Over the past year, the real estate market has seen a significant upswing, with the realty index skyrocketing by over 125 percent. This surge can be attributed to strong pre-sales figures of realty firms. Stock prices of realty firms have remained buoyant, largely due to announcements of upcoming projects, promising pre-sales figures, and expansions into new markets by these companies.

Amid this environment, let's analyse between Godrej Properties (GPL) and DLF, which realty stock has better long-term investment opportunities.

Stock Price Trend

Both DLF and Godrej Properties have outperformed the benchmark this year so far. While DLF has risen almost 29 percent in 2024 YTD, GPL has advanced 24 percent in this period. In comparison, the Nifty Realty index has gained over 18 percent and Nifty has added 3 percent in this period.

Both the stocks have given positive returns in both the months of 2024 so far. DLF has jumped 13 percent in February, extending gains to sixth straight month. It rose 9.7 percent in January. Meanwhile, GPL rose 1.2 percent in February, extending gains for the fifth straight month. It surged around 18 percent in January.

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Meanwhile, in the last 1 year, both DLF and GPL have given multibagger returns. DLF has soared over 159 percent whereas GPL has rallied 114 percent. In comparison, Nifty Realty has surged over 125 percent while Nifty is up over 27 percent.

DLF and Godrej Properties also hit their 52-week highs in intra-day deals today, March 4. DLF hit its one-year high of 932, soaring 177 percent from its 52-week low of 336.50, hit on March 14, 2023. GPL also touched its 52-week high of 2,524, jumping 151 percent from its 52-week low of 1,005, hit on March 29, 2023.

Meanwhile, in the long term, 3 years as well, DLF has emerged as the winner. The stock has given 194 percent returns whereas GPL is up just 67 percent.

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Earnings

DLF reported a 27 percent increase in consolidated net profit to 655.71 crore in the December quarter on higher income and fewer expenses. Its net profit stood at 517.94 crore in the year-ago period. Total consolidated income rose to 1,643.51 crore in the October-December quarter of the 2023-24 fiscal from 1,559.66 crore in the corresponding period of the previous year. The largest real estate player in terms of m-cap, DLF, recorded its highest quarterly sales booking of 9,047 crore, backed by multiple launches during the quarter. The company also reported strong cash flow with healthy surplus cash generation from operations at 1,108 crore.

On the other hand, Godrej Properties' net profit rose 6 percent YoY to 62.47 crore in Q3FY24. The company's revenues came in at 330.44 crore, up 68.39 percent YoY. The company earned its highest-ever pre-sales in the December quarter of FY24, totaling 5,700 crore, up 76 percent from the previous year. The pre-sales were aided by eight project launches during the October-December period, which contributed around 69 percent to the bookings. The bookings for the nine months ended December 31, 2023, reached 13,000 crore, which is 93 percent of the company’s FY 24 target, the company said.

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Which realty stock has better long-term investment opportunities?

Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy, prefers DLF over Godrej Properties.

Both DLF and Godrej Properties have given superb returns in the past year and both companies have many project launches in the pipeline. But among the two, DLF appears particularly promising due to its ambitious pipeline of project launches. With anticipated launches totaling a gross development value (GDV) of 32,000 crore, significantly surpassing previous years' figures, DLF stands to enhance its operating cash flows and profitability substantially.

On the contrary, Moorjani, Research analyst, SAMCO Securities, likes Godrej Properties better.

Currently, both DLF and Godrej Properties are trading at exorbitant valuations. So, investors should avoid fresh entry into these stocks, while investors already holding these stocks may hold. Godrej Properties recently reported its highest-ever quarterly sales bookings for 2nd quarter in a row. It also marked its entry in Hyderabad by acquiring a 12.5-acre land parcel which has a significant revenue potential of Rs.3,500 crore. Moreover, unlike many others in the sector, Godrej Properties has reported growth in both its revenue as well as profits. Therefore, based on its financial performance and future growth prospects, Godrej Properties appears to be well-positioned for potential investors.

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Meanwhile, global brokerage house Jefferies has a ‘buy’ call on both the realty stocks. It has raised the target price of Godrej Properties to 2,700 (from 2,635), indicating an upside of over 7 percent. On the other hand, the brokerage has a target of 875 for DLF, which has already been hit.

"Back-to-back record pre-sales quarters and a strong launch pipeline for 4Q puts Godrej Properties in range for another 50 percent plus sales growth this year. Its revenue was a miss at 330.44 crore, as a result of no significant project deliveries during the quarter. GPL has indicated that a few of its key projects, such as Worli (MMR), Ashok Vihar (NCR), and Sarjapur (Bengaluru) are likely to be delayed. However, excluding these projects, the launch pipeline for 4QFY24 remains strong," said Jefferies on GPL.

For DLF, it noted that the realty firm saw a 15-year high quarterly profit, an all-time high pre-sales, and 1000 crore+ FCF generation in Q3. Further, as per the brokerage, DLF’s updated project pipeline shows launches for FY24 are completed, while the pipeline for FY25/26 has been increasing significantly. The lease performance stayed steady, with 8 percent YoY rental growth, it added

On the other hand, CLSA has 'sell' call on both stocks.

Ultimately, investors must weigh these differing perspectives and conduct their own research before making investment decisions in the realty sector.

 

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.

 

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Published: 04 Mar 2024, 11:58 AM IST
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