Kolte Patil share price skyrockets 10%, doubles money in a year; Here’s why Motilal Oswal sees 34% upside

Kolte Patil share price jumped almost 10 per cent in morning deals on Wednesday, April 10, after brokerage firm Motilal Oswal initiated coverage on the stock with a buy recommendation. 

Motilal Oswal has initiated coverage on the stock with a 'buy' recommendation, pegging the target price at ₹700, implying a 34 per cent upside.

Kolte Patil share price opened at ₹536 against its previous close of ₹517.45 and soon jumped almost 10 per cent to hit the level of ₹567.80 on NSE. Around 10 am, Kolte Patil share price traded 8.54 per cent higher at ₹561.65 apiece.

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Kolte Patil share price has clocked robust gains in the last one year. As of the previous session's close, the stock has doubled investors' money, jumping about 101 per cent over a year. However, it has still underperformed the Nifty Realty index which has seen a whopping gain of 136 per cent in the same period. Equity benchmark Nifty 50 has gained about 29 per cent over a year.

"After a decade of muted performance, Kolte Patil Developers is witnessing strong growth in pre-sales as bookings reported 36 per cent CAGR over FY21-23. Given its strong pipeline, we believe the company can maintain a 25 per cent CAGR in pre-sales at least for the next two years with further room for growth from new project additions," said Motilal Oswal.

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The brokerage firm pointed out that the company's ability to close new project additions will determine the sustainability of growth but it believes the company's focus on growth as well as its strong balance sheet should enable it to focus on project acquisitions.

"Its past track record of steady margins and cash flows also implies that growth will be underpinned by profitability and execution," said Motilal Oswal.

Motilal Oswal expects Kolte Patil Developers to deliver a 22 per cent CAGR in pre-sales over FY24-26 to ₹4,500 crore.

"Targeted project additions over the next six to nine months can enable the company to sustain a healthy nearly 30-35 per cent CAGR over the next two years," Motilal Oswal said.

Moreover, Motilal expects the company's gross margin to recover to 34 per cent by FY26, as the impact of 9 per cent CAGR in realisation over FY21-23 will be realised in profit and loss with a lag.

This should result in EBITDA margin expansion to 17 per cent in FY26 from 9 per cent in FY24, leading to a 21 per cent CAGR in EBITDA over FY23-26E, Motilal said.

PAT margin may also recover to 8 per cent in FY26E, resulting in a PAT of ₹160 crore and a RoE (return on equity) of 14 per cent, similar to what the company clocked in FY18.

The inability to add new projects and any slowdown in demand momentum are the key risks, as per Motilal Oswal.

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