Which real estate stocks to buy: CLSA selects these stocks as the real estate market recovers from consolidation

Global research and brokerage firm CLSA said real estate developers aim to double their sales over the next three to four years. (Photo: REUTERS)

Domestic real estate developers could see a rebound, after experiencing years of consolidation, as the country recovers from the covid-induced economic crisis. Global research and brokerage firm CLSA said real estate developers aim to double sales over the next three to four years, benefiting from strong demand, affordability and industry consolidation. The developers are also aiming to continue debt reduction, having reduced the debt by 27% the previous year. Seeing a positive outlook for the sector over the longer term, CLSA selected three listed real estate sector stocks to buy. “We prefer developers who focus on growth, healthy profitability and a prudent allocation of capital,” they said.

DLF

Target price: Rs 35

On the rise – 20%

The DLF share price has jumped 22% so far this year to trade at Rs 291 each. CLSA said the company’s sales fell sharply in the midst of the second wave of the pandemic, but picked up sharply in June. DLF is confident of reaching sales targets of Rs 40 billion for fiscal year 22, despite the impact of the second wave. The company increased prices by around 20% in the second phase of its independent flooring project and the market absorbed the price increase. CLSA said DLF’s loaned inventory will generate significant cash flow. “Costs will be managed, new product launches will be cash neutral in the first year and cash positive in the second year,” they added.

Prestige Real Estate Projects

Target price: Rs 370

On the rise – 29%

The company is targeting pre-sales of Rs 65 billion this fiscal year and Rs 80 to 100 billion over the next three to five years. CLSA said Prestige Estates business was hit in Wave 2, but sales would be higher compared to the same quarter last year. “Despite a slow first quarter of this fiscal year, he is confident to achieve 20% sales growth in FY 22 through faster release this year due to vaccinations and the contribution of new markets to high added value such as Mumbai from fiscal 22 ”, said CLSA. So far this year, the Prestige Estates share price has gained 10% to trade at Rs 290 each.

Real estate Sunteck

Target price: Rs 425

On the rise – 35%

The company has its eyes set on launching new projects and phases in Vasai, Vasind and Naigaon during this fiscal year. Upcoming projects focus on middle income to affordable products. CLSA said the company expects strong cash flow generation from its loan inventory and will continue to reduce debt and borrowing costs. Currently, Sunteck Realty is trading at 328 per share and has lost 7% year-to-date.