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Business News/ Markets / Stock Markets/  Stock Analysis: Amid real estate market boom, Sunteck Realty underperforms, down 4% this year; should you still buy?
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Stock Analysis: Amid real estate market boom, Sunteck Realty underperforms, down 4% this year; should you still buy?

Amid the overall surge in the real estate market, Sunteck Realty has emerged as the worst-performing stock in the sector, both over the past year and in the year-to-date (YTD) period of 2024.

Sunteck Realty has encountered a notable downturn. (Pixabay)Premium
Sunteck Realty has encountered a notable downturn. (Pixabay)

Over the past year, the real estate market has experienced a remarkable surge, evidenced by a significant multibagger return in the realty index. This notable uptrend is primarily attributed to robust pre-sales figures reported by realty firms. The buoyancy in stock prices of real estate companies can be attributed to various factors, including announcements of upcoming projects, promising pre-sales figures, and expansions into new markets.

The Nifty Realty index has witnessed an impressive surge, soaring over 147 percent in the last year, surpassing around 29 percent jump in the benchmark Nifty index. Moreover, in the year-to-date (YTD) period of 2024, the realty index has continued to outperform the benchmark, with a rise of around 22 percent compared to an over 3 percent gain in the Nifty index.

Read here: Nifty Realty surge in last 1 year; will the trend continue?

Amid the overall surge in the real estate market, Sunteck Realty has emerged as the worst-performing stock in the sector, both over the past year and in the year-to-date (YTD) period of 2024. While the realty sector has seen significant gains, with the Nifty Realty index soaring, Sunteck Realty has shown comparatively modest performance. Over the past year, it has gained 44 percent, and this year, it is down by 4 percent, significantly underperforming the broader realty index.

The stock is up 10 percent in the 2 sessions of April after a 15.75 percent and 1.43 percent drop in March and February, respectively. Meanwhile, it rose 5.3 percent in January this year.

The scrip is also trading almost 17 percent away from its 52-week high of 511.65, hit on December 4, 2023. Still, it has jumped 57 percent from its 52-week low of 271.25, hit on June 23, 2023.

Read here: SM REITs to boost property fractional market growth by 10 times to $5 bn

Earnings

While many real estate companies are experiencing an upswing in sales and revenues, Sunteck Realty has encountered a notable downturn. In the third quarter (October-December), the company reported a substantial decline in revenue, along with losses.

In Q3FY24, Sunteck Realty witnessed a significant decline in revenue, with a staggering 52 percent drop to 42.4 crore. Additionally, the company reported an EBITDA loss of 15.6 crore, marking a stark contrast from the previous year's EBITDA of 18 crore in the same quarter. Furthermore, Sunteck Realty recorded a net loss of 9 crore, a notable downturn from the profit of 2 crore reported in the corresponding period last year. These figures reflect a challenging financial performance for the real estate firm compared to the previous year.

Read here: My realty investments have bettered those of equity: White Oak's Somaiyaa

But will its performance recover this year? Here's what technical and fundamental experts say:

Technical View

Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd

The counter has experienced a significant correction from 500 to 380 levels. This suggests a substantial decline in price over a given period. The overall structure becomes lucrative for long-term investors as it has given a positive closing above 200-DMA and a smart recovery from the lower levels near 380. On the upside, 460 is an immediate susceptible area. If the price manages to break above this resistance level with conviction, it indicates a potential shift in market sentiment and opens up the possibility of a run-up towards 500 levels in the near term.

Rohan Shah - Technical Analyst, Religare Broking Ltd

Sunteck Realty has been trading in a broad range for the last more than 8 months, wherein 500 being the upper end of the range and 400 is the lower end of the range. This week, the stock has registered a breakout from the basing pattern which has formed at the lower end of the range. Also near a similar juncture, the stock has the support of its long-term moving average and its previous resistance zone which highlights the recent swing low to act as strong support for the stock. Thus, going ahead following price action and buoyancy in the sector we expect the stock to witness a catch-up rally and inch higher towards 455 and 490 levels. Whereas, the 400-390 zone remains a crucial support for the stock.

Read here: Godrej Properties vs DLF: Which realty stock should you pick for long term?

Gaurav Bissa, VP, InCred Equities

Sunteck failed to bank on the momentum enjoyed by many of the real estate stocks. while it has moved strongly from 270-280 levels, the overall move in the price has been in a range. On weekly charts, it is trading in a 6-year consolidation phase which has been resulting in an underperformance against its peers. On the positive side, it is forming a small base pattern on the daily charts around 380 levels which can push it towards the 460-480 zone.

Rajesh Palviya, SVP - Technical and Derivatives Research, Axis Securities

Since Dec'23, the stock has been in corrective mode. However, with the past couple of price corrections, the stock has retraced by 50% of its prior up move (272-511). The stock has recaptured its 200-day SMA and rebounded sharply. From current levels, the immediate support zone is placed around 390-378 levels. On the other hand, the stock may rally towards 460-500 levels. The daily strength indicator RSI is positive terrain, indicating rising strength.

Read here: Mantra for Sunteck Realty investors: wait and watch

Fundamental View

Sharekhan: The brokerage has retained a ‘buy’ call on the stock with a target price of 564, indicating an upside of over 32 percent.

"Sunteck Realty has a robust and sustainable growth potential in the near to long term, with solid foundations built across key regions and income groups in the lucrative MMR market. It remains committed to expediting sales of the ready assets at the Bandra-Kurla Complex. The company has two major project launches during FY2025, which along with healthy sustenance sales from existing projects should aid in driving sales booking growth. Its tie-up with IFC would provide further scale to sustain future growth. The stock has seen a correction of over 20 percent in a little over trailing one month which we believe unduly factors in the near-term sluggishness in pre-sales. The stock is currently trading at a P/B multiple of 1.8x/1.7x on FY2025E/FY2026E and offers a buying opportunity. Hence, we retain our Positive view on the stock owing to its strong growth outlook over the medium to long term," explained Sharekhan.

Read here: Emerging realty hotspots poised to redefine NCR's real estate scene with promising returns

Motilal Oswal: The brokerage also has reiterated a ‘buy’ call on the stock with a target price of 640, implying a 50 percent upside.

"In 9MFY24, Sunteck reported pre-sales of 1,240 crore, up 16 percent YoY, largely on the back of a pick-up in bookings at its uber-luxury projects in BKC as well as its aspirational project in Naigaon. In Q3FY24, Sunteck launched an aspirational project in Kalyan, unveiling a tower with a saleable value of 300-350 crore. Within just a month, 70 crore, or 20-25 percent of the total value, was booked. This contributed seven ppts to the overall performance for 9MFY24. The contribution from Kalyan is expected to increase as 4Q will witness the first full quarter of operation. Additionally, the company plans to launch a third tower at Mira Road, with a GDV potential of INR5-6b. This is expected to receive strong response on the back of healthy traction in the first two towers. That, coupled with sustained traction at existing projects, will lead to bookings of 650-750 crore in Q4FY24, taking the full-year sales to 1,900-2,000 crore, up 20-25 percent YoY, and in line with management guidance," noted MOSL.

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: 02 Apr 2024, 01:40 PM IST
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