Which real estate shares to buy: CLSA picks these stocks as property market recovers post-consolidation

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Updated: July 09, 2021 11:15 AM

Domestic real estate developers may witness a rebound, after having seen years of consolidation, as the country recovers from the covid-induced economic slump.

stocks to buyGlobal brokerage and research firm CLSA said that real estate developers aim to double their sales over the next three to four years. (Image: REUTERS)

Domestic real estate developers may witness a rebound, after having seen years of consolidation, as the country recovers from the covid-induced economic slump. Global brokerage and research firm CLSA said that real estate developers aim to double their sales over the next three to four years, benefiting from strong demand, affordability and industry consolidation. Developers also aim to continue trimming debt, after having reduced debt by 27% last financial year. Seeing a positive outlook for the sector over the longer run, CLSA has picked three listed real estate sector stocks to buy. “We prefer developers who are focused on growth, healthy profitability and prudent capital allocation,” they said.

DLF

Target price: Rs 35

Upside – 20%

DLF share price has jumped 22% so far this year to trade at Rs 291 apiece. CLSA said that the company’s sales dropped sharply amid the second wave of the pandemic but have revived sharply in June. DLF is confident of achieving sales guidance of Rs 40 billion for FY22, despite the impact of the second wave. The company has hiked prices of ~20% in the second phase of its independent floors project and the market has absorbed the price hike. CLSA said that DLF’s ready inventory will generate significant cash flow. “Cost will be managed, new product launches will be cash-neutral in year one and cash positive in year two,” they added.

Prestige Estates Projects 

Target price: Rs 370

Upside – 29%

The company is targeting pre-sales of Rs 65 billion in this financial year and Rs 80-100 billion over the next three-five years. CLSA said that Prestige Estates’ business did take a hit during the second wave but sales will be higher compared to same quarter last year. “Despite a slow first quarter of this fiscal year, it is confident of achieving 20% sales growth in FY22 driven by faster unlocking this year due to vaccinations and contribution from new high-value markets such as Mumbai starting from FY22,” CLSA said. So far this year, Prestige Estates’ share price has gained 10% to trade at Rs 290 apiece.

Sunteck Realty

Target price: Rs 425

Upside – 35%

The company has its eyes set on launching new projects and phases in Vasai, Vasind and Naigaon this fiscal year. The focus for projects ahead is on middle-income to affordable products. CLSA said that the company expects strong cash generation due to its ready inventory and will continue to reduce debt and borrowing costs. Currently, Sunteck Realty trades at 328 per share and has slipped 7% year-to-date.

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