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Godrej Properties’ Share Price Tumbles On Earnings Downgrades

Analysts have turned cautious on Godrej Properties’ prospects.

The Planet Godrej residential building, developed by Godrej Properties Ltd., right, stands in the Byculla area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
The Planet Godrej residential building, developed by Godrej Properties Ltd., right, stands in the Byculla area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Godrej Properties Ltd. became the worst performer on the Nifty Midcap index after a few analysts lowered investment recommendations for the real estate developer, citing a potential rise in debt and weak operating cash flows in the quarter ended September.

The company reported a 77% year-on-year decline in net profit to Rs 7 crore in the July-September period. Its revenue from operations slumped 66% to Rs 89.5 crore. The developer, however, said construction activity has resumed across sites and workforce was now at 130% of the pre-pandemic strength as of September-end.

Shares of Godrej Properties fell as much as 6.9%, extending Tuesday's decline of 9.2%, to Rs 965 apiece. That compares with a 0.23% gain in the Nifty 50 Index.

Of the 16 analysts tracking Godrej Properties, seven have a 'buy' rating, four recommend a 'hold' and the rest suggest a 'sell.' The average of Bloomberg consensus 12-month target prices implies a downside of 6%.

Here’s what analysts have to say about Godrej Properties’ Q2 results:

UBS

  • Maintains 'sell' rating; price target at Rs 550 apiece.
  • Q2 a miss on most parameters.
  • Weak operating cash flows yet again.
  • Vulnerable to de-rating as sluggish recovery would slow pace of project additions.
  • Cuts EPS estimates owing to poor profitability.
  • Already pricing in consolidation driven market share gains.

Macquarie

  • Downgrades to 'neutral' from 'outperform'; price target at Rs 1,050 apiece.
  • Debt likely to rise in the next few quarters.
  • New launches in second half of FY21 should help in improving residential pre-sales.
  • Downgrade given limited upside from current levels.
  • Will benefit from consolidation in real estate space.

ICICI Securities

  • Downgrades to 'sell' from 'reduce'; price target at Rs 826.
  • Net debt rises owing to land spend.
  • Targeting growth in FY21 sales booking.
  • Focus remains on upcoming launches.
  • Downgrade owing to 13% rise in share price over the last three months.

Jefferies

  • Maintains 'buy' rating; raises price target to Rs 1,215 from Rs 1,040.
  • P&L remains weak while execution normalises.
  • Market share gains and improving residential cycle are key drivers.
  • New launch pipeline remains strong.
  • Raises FY21 sales estimates by 11%.
  • Well placed to take advantage of industry consolidation and likely cycle pick-up.