Improved sentiment in commercial as well as residential real estate space can help
CMP: 320
Suggested buying zone: Either above 336 or on dips around 310-300
TGT: 360-390-425 (1-12M)
TGT: 550 (24M)
TSL<294
Note: Consecutive closing below 294 for any reason, the scrip may fall up to 270-225, where it can be again accumulated for better buying average (investment purpose).
Some key points & rationale:
Godrej Prop (GP) is in the limelight for the last few months for its BKC (Bandra Kurla Complex-Mumbai) commercial project monetisation talks.
While the deal (Rs.1480 cr and the buyer is Abott India) was officially announced few days ago, it was in works for the last few months.
This particular deal is very significant in the sense that it will almost halve the consolidated balance sheet debt of GP by FY-17.
The deal pricing is also a positive surprise and indicates rising office rent and improved demand-supply dynamics in commercial properties thanks to global liquidity and "Made In India" or "Make India" initiative.
In the last one year, as par various reports, demand for commercial property (office space) has grown significantly higher by around 70% (H2FY15), specially from MNC IT, Pharma and various start-ups companies in prime & growing places in various key metro cities.
Looking forward, with expected overall economic recovery in India aided by lower funding cost, better operating leverages and depressed commodity prices, we can see improved sentiment among corporates and sequentially higher demand for commercial spaces.
The "smart city & smart village (out side main city area)" theme along with infra push and forthcoming 7-th pay commission liquidity can translate higher demand for residential projects also.
Apart from that, RBI's commitment of accommodative policy (lower interest rate environment) will help for entire real estate sector in the days ahead.
As par BG metrics:
Current median valuation of GP may be around: 300
Projected fair valuations might be around: 340-425-475 (FY:16-18)
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | LV | SV | MV | 200-DEMA | 10-DEMA |
| GODREJPROP | 10.04 | 92.57 | 30 | 285.61 | 308.39 | 297.00 | 270.83 | 315.76 |
| GODREJPROP | 12.95 | 101.5 | 30 | 324.37 | 350.25 | 337.31 | 270.83 | 315.76 |
| GODREJPROP | 20.45 | 111.45 | 30 | 407.62 | 440.13 | 423.88 | 270.83 | 315.76 |
| GODREJPROP | 25.55 | 121.75 | 30 | 455.62 | 491.97 | 473.79 | 270.83 | 315.76 |
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