Maintain ‘hold’ on Godrej Propoerties with a target price of Rs 310 per share. We calculate a 12-month forward fair value by applying a 25% premium to our NAV estimate of R282. We then discount it back by one year to reflect the current fair value target price. Our target price implies a downside to the current price, therefore we maintain a ‘hold’ rating.
The company launched the first residential phase of its mixed use flagship project spread over 34 acre in Vikroli. The first phase launch is comprised 374 apartments comprising saleable area of 0.5 msf spread over 6.7 acre. As per the company presentation, it also intends to launch the second phase during the current fiscal year.
We were impressed with the overall specifications. Godrej brand commands a lot of respect and the project could see impressive sales figures at its launch. However, we felt the pricing is little steep and would find few takers as the project progresses. Also, GPL may find it hard to capture price appreciations for its investors at a rate higher than the cost of capital.
We believe this is the most critical project for GPL as it sets the base for launching the huge 400-plus acre of land parcel over the years and inappropriate pricing could slow the pace of sales for the rest of the projects in the location.
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