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This article is more than 1 year old.

This midcap realty stock with reasonable valuations offers highest 1Y returns

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One midcap realty player that continued to maintain its momentum in terms of sales growth and comfortable valuations is Brigade Enterprises.

This midcap realty stock with reasonable valuations offers highest 1Y returns
The real estate sector has been under pressure ever since GST and demonetisation hit the sector especially the small players. After the implementation of RERA, medium and small players did suffer from regulatory arbitrage. However, one midcap realty player that continued to maintain its momentum in terms of sales growth and comfortable valuations is Brigade Enterprises.
It is the only player in the realty midcap and large-cap space that has delivered nearly 56 percent return in the last one year. This year, the stock rallied over 40 percent.
Although the large-cap players should benefit from the GST and RERA since the market has already factored in the growth, the midcap companies like Brigade Enterprises with reasonable valuations and growing leasing/sales volume have continued their pace towards gains.
The company’s sales during the July-September quarter rose 46 percent year-on-year (YoY) at Rs 550 crore while the net profit jumped 39 percent YoY to Rs 75 crore. Except for other income, all other P&L components of the company have delivered gains.
In terms of valuations, the company is trading currently at 21.36x which is lower than the industry P/E of 27.12x.
Nirmal Bang believes that the stock sits at an attractive valuation, supported by steady residential sales despite a weak environment, strong portfolio of operational rental assets and a planned increase in commercial and retail properties over the next 5-7 years.
The company’s leasing business saw gains, revenues rose 50 percent YoY. However, the debt rose on YoY basis due to hospitality debt and leasing capex which increased 31 percent and 73 percent respectively, Bang added.
The brokerage believes the stock will see an upside of 23 percent, and maintained ‘buy’ call with a target price (TP) of Rs 255 per share.
HDFC Securities maintained ‘neutral on the stock with TP at Rs 191. It said that strong leasing in two SEZs and robust residential pre-sales were the key positives.
The brokerage expects that mid-income and affordable segments are expected to drive residential sales with about 86 percent of Brigade’s new launches in the affordable housing segment.
Anand Rathi remained bullish on the stock led by the increase in bookings and project completions.
“We retain our sanguine outlook owing to the healthy launch pipeline, continuing steps to push volumes in the DevCo and more leases at the IT SEZs, and on the hospitality benefits from more commissions. Any success with efforts to rope in a strategic investor in hospitality would further the rosy outlook,” the report added.
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