Godrej Properties hits fresh high amid new land acquisitions; analysts forecast profit rise

livemint.com:

Godrej Properties Ltd soared to a 52-week high of ₹1,616 on the National Stock Exchange on Thursday, driven by promising new land acquisitions. The real estate giant recently acquired approximately 15 acre of land in Gurugram, Haryana, and plans to develop for premium residential properties. Additionally, a 7.44 acre parcel in New Alipore, a high-end residential area in Kolkata, will soon be under Godrej's ownership, acquired from the West Bengal Housing Infrastructure Development Corp.

Ltd. The increased focus on land acquisitions is a positive and should boost investor sentiment. Analysts at Jefferies India expect the company's profitability to rise from less than 10% of pre-sales to 15% as the utilization of these land acquisitions accelerates.

“89% (by-value) of the ~Rs520bn worth of projects acquired by Godrej over FY21-1QFY24 are via the buy-out route. Bulk of these land acquisitions have been negotiated when competition for land buy-outs has been low. Moreover, residential real estate prices have risen since these acquisitions as a strong property up-cycle is now underway," said a Jefferies report dated 5 July.  The report estimates an Ebitda (earnings before interest, tax, depreciation, and amortization) margin of around 30% for this portfolio, with land acquisition costs totaling about 15% or ₹7,500 crore.

However, the company's aggressive acquisition strategy has resulted in increased debt, with trends in borrowing costs warranting attention. Meanwhile, recent registration data indicate a 5% month-on-month and 4% year-on-year increase in housing units registered in Mumbai in June, marking the highest June performance in a decade with 10,319 units. According to a report from Nuvama Research, Mumbai's real estate