Godrej Properties’ Share Price Tumbles On Earnings Downgrades
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’ Share Price Tumbles On Earnings Downgrades

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.
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