Gurgaon: In its latest India Property(DLF-Godrej) report released on April 1, Morgan Stanley has made significant adjustments to its ratings and target prices within the real estate sector. Notably, DLF Ltd. has been downgraded from ‘overweight’ to ‘equal weight’, although its target price has been raised to Rs 900 per share from Rs 770 previously, indicating a potential downside of 5.1% from current levels.
DLF
Morgan Stanley’s revised 2025 pre-sales estimate for DLF stands at Rs 22,500 crore, up from Rs 18,000 crore, driven by stronger-than-anticipated sales in the first nine months of the financial year 2024. However, the brokerage remains cautious about the stock’s potential due to several factors:
- Anticipated near-term momentum slowdown, with Privana West sales expected to shift to the first quarter of the new fiscal year.
- Expected launch delays in the June quarter due to the upcoming Lok Sabha election.
- Concerns regarding project completion timelines, as many projects may not be finished within the next three to four years despite robust pre-sales growth.
Morgan Stanley predicts a 15–18% revenue decline for fiscal years 2024–26 due to lower revenue recognition, as major project launches scheduled from fiscal year 2022 are slated for completion beyond fiscal year 2026.
Godrej Properties
In contrast, Morgan Stanley has upgraded its rating for Godrej Properties Ltd., supported by revised pre-sales estimates. The brokerage expects Godrej Properties’ pre-sales to grow by 20% to Rs 23,400 crore in fiscal year 2025, significantly higher than its previous estimate of Rs 16,800 crore. Other factors contributing to the upgraded rating include:
- Aggressive land acquisitions, totaling Rs 1,000 crore across three sites, with a revenue potential of Rs 7,800 crore.
- Attractive stock valuation trading at its long-term average, especially considering recent growth trends.
- Anticipated improvement in return on equity over time.
However, Morgan Stanley notes that the company’s gearing is on the rise due to aggressive land banking, with net debt standing at Rs 6,900 crore as of December and interest expenses accounting for 47% of net income in the first nine months of fiscal year 2024.
Other Real Estate Players
Morgan Stanley maintains an ‘overweight‘ rating on Prestige Estates Projects Ltd. with a price target of Rs 1,400 per share, anticipating a 20% year-on-year growth in pre-sales to Rs 25,200 crore. Revenue estimates for fiscal years 2024–26 have been adjusted upwards by 3%, 11%, and 9% respectively.
For Macrotech Developers Ltd., the brokerage retains an ‘equal weight‘ rating with a target price of Rs 1,050 per share, with pre-sales estimates largely unchanged. Margin assumptions, however, have been adjusted to 25% from 30% to account for increased joint-venture share projects.
Lastly, Oberoi Realty Ltd. maintains its price target of Rs 1,180 per share, with a 6% downward revision in pre-sales estimates for fiscal years 2024–26.
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