GPL's pipeline for H2FY25 has a gross development value of Rs 15,000 core including projects in Gurugram, Noida, Mumbai, Pune and Hyderabad.
Expansion of its development portfolio, brokerage upgrades, and strong outlook have led to a 15 per cent gain for the stock of real estate major Godrej Properties (GPL) in six trading sessions.
The company recently acquired a 53-acre land parcel in Joka, Kolkata with an estimated development potential of 1.3 million square feet of saleable area with an estimated revenue potential of Rs 500 crore.
In addition to recent acquisitions, the performance of the company stood out amongst peers in the September quarter (Q2FY25).
It posted a 219 per cent year on year (Y-o-Y) growth in revenue at Rs 1,090 crore while operating profit was at Rs 31.9 crore as compared to a loss of Rs 61.7 crore in the year-ago quarter.
The company’s adjusted net profit came in at Rs 330 crore and was up 360 per cent Y-o-Y with net profit margin at 31 per cent.
GPL’s Q2 highlights were strong delivery and high operating cash flow.
GPL delivered projects worth 6.6 million square feet in Q2 and 9.3 million square feet in H1FY25 with a guidance of 15 million square feet in FY25.
It recorded a strong cash flow of Rs 1,830 crore (126 per cent Y-o-Y) in the quarter.
The company launched five new projects or phases in Q2 and sold Rs 2,760 crore, contributing 53 per cent of the total booking, which was Rs 5,200 crore (3 per cent Y-o-Y).
The NCR continues to substantially contribute to bookings.
In H1, the region contributed 39 per cent of sales, whereas Bengaluru contributed 28 per cent and Mumbai Metropolitan Region (MMR) 23 per cent.
Due to its presence in all four markets, GPL is benefiting the most from the upcycle.
GPL's sales booking in H1FY25 is Rs 13,800 crore (up 89 per cent Y-o-Y), achieving 51 per cent of its FY25 guidance of Rs 27,000 crore.
NCR was the largest contributor with Rs 2,000 crore, followed by MMR with Rs 1,740 crore booking value in Q2.
Collections were also strong with the Q2 figure at Rs 4,000 crore (up 68 per cent Y-o-Y).
Business development saw the addition of six projects with gross development value (GDV) of Rs 9,700 crore in Q2 and GDV of Rs 12,700 crore year-to-date.
This is 63 per cent of guidance for FY25.
The operating cash flow (OCF) is up due to GPL's rising economic interest.
From 39 per cent of total sales booking in FY19, it has grown to 85 per cent in FY24, and 93 per cent in 1HFY25. OCF as a percentage of collection improved from 29 per cent in FY19 to 38 per cent in FY24 and 40 per cent in H1FY25.
GPL’s pipeline for H2FY25 has a GDV of Rs 15,000 core including projects in Gurugram, Noida, Mumbai, Pune, and Hyderabad.
It looks set to easily surpass its guidance. Projects in the greater than $1 million ticket size in NCR are a key near-term monitorable.
GPL's strategy targets an internal rate of return (IRR) of 20 per cent to 25 per cent and operating profit margins of 25 per cent to 30 per cent.
The company aims at profit margins of 15 per cent through the entire economic cycle.
The key markets include Mumbai, NCR, Bangalore, and Pune.
But GPL remains open to projects in Ahmedabad and Kolkata, having recently acquired a project in Ahmedabad followed by the Joka parcel.
Strategic preference for outright acquisitions is visible.
The cost of land (as a per cent of GDV) is estimated at 20-25 per cent.
This is higher but offset by better marketability driving fast conversion.
Net debt is stable at Rs 7,500 crore with a net debt to equity of 70 per cent.
For projects added post-Q2, land payments totaling around Rs 1,000 crore have been made, with overall pending land payments standing at Rs 2,500-3,000 crore.
Analysts are recommending a ‘buy’ on the basis of a valuation of normalised pre-sales (three-year moving average), project-level operating profit margins of 30-33 per cent, and GPL’s economic share at around 80 per cent.
The key downside risks are margin-dilutive business development additions, potential delays in project launches, and weak micro markets.
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