Emkay has initiated coverage on Aditya Birla Real Estate with a Buy rating and target price of Rs 3,300 per share. They expect scope for upward re-rating in the share price of Aditya Birla Real Estate over the medium term.
According to the brokerage house, collections from the real estate business are projected to grow 32% on a CAGR basis between FY25- FY27, while the paper business sale would generate additional cash flows and help reduce net debt to Rs 2,000 crore by FY27 despite new project additions.
Emkay on Aditya Birla Real Estate: NAV boost likely
Emkay explained that the valuation of the stock implies a 75% premium to residential NAV. The continuation of project additions over the mid-term is expected to further boost the NAV. The company has a strong launch pipeline to drive 25% pre-sales. It’s launch inventory has gross development value (GDV) potential of over Rs 45,000 crore.
Emkay on Aditya Birla Real Estate: New markets to boost growth
The brokerage house is also upbeat about the fact that the real estate company has stepped up focus on growth and targets new business development across key markets including Mumbai, Delhi, Bengaluru, and Pune. They believe that this would build a healthy launch pipeline over the medium term. On the back of this, Aditya Birla Real Estate expects bookings to nearly double to Rs 15,000 crore by FY28.
Emkay on Aditya Birla Real Estate: Paper division divestment to help
Moreover, Emkay expects the paper division divestment to provide growth capital for real estate. Aditya Birla Real Estate recently executed a business transfer agreement with ITC for the slump sale of the paper business. It was worth Rs 3,500 crore with the completion likely in FY26. Of the proceeds, Rs 2,000 crore will be used to repay debt linked to paper assets, The rest will fund the growth in the real estate business. According to Emkay, “this is a prudent move that will enable more efficient capital allocation and channelize management focus on scaling the core real estate business.”
Emkay on Aditya Birla Real Estate: Sturdy balance sheet
Following the demerger of the cement business, the net debt fell sharply fell to Rs 1,000 crore in FY19 from Rs 6,000 crore in FY15. Subsequently, despite exponential growth in the real estate business, the net debt increase was limited to Rs 3,600 crore in FY25 led by sharp rise in collections.