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Mumbai-based developers Macrotech Developers (Lodha) and Oberoi Realty have emerged as top gainers among largecap realty stocks over the past month, with gains ranging from 29 per cent to 33 per cent.
Strong ongoing sales trends in Mumbai’s core market, record bookings in the January-March quarter, and healthy guidance for 2024-25 (FY25) have propelled these companies, which derive the majority of their revenues from India’s financial capital.
They have outperformed peers such as DLF and Godrej Properties, which have delivered low-to-mid single-digit returns during this period.
A near-term catalyst has been a 22 per cent rise in housing units registered in Mumbai for May, totalling 12,000 units — the highest for the month in 12 years.
A slight increase in average ticket size resulted in a 24 per cent rise in the overall value of registered units to Rs 17,200 crore.
From January to May, registrations reached 60,819 units, marking a 17 per cent increase over the previous year, with sales by value up 2 per cent to Rs 81,000 crore.
Analysts Parvez Qazi and Vasudev Ganatra of Nuvama Research believe that buoyant sales will continue, driven by robust business development targets, increased launches supported by improved cash flow, stabilised interest rates, diversification, and market share gains.
They anticipate that organised developers based in Mumbai, including Macrotech Developers (Lodha), Oberoi Realty, Godrej Properties, and Sunteck Realty, will benefit from strong housing sales in the city.
The recent sales performance and outlook for the larger Mumbai-based players have been robust.
Lodha reported its best-ever quarter in March in terms of bookings, reaching Rs 4,230 crore — a 40 per cent increase year-on-year (Y-o-Y) — supported by 5 million square feet (sq. ft) of launches.
The company closed 2023-24 (FY24) with bookings of Rs 14,500 crore, consistent with management guidance.
For FY25, Lodha expects bookings of Rs 17,500 crore, reflecting a 20 per cent Y-o-Y growth driven by volume increases from new launches and modest price adjustments.
Business development initiatives and construction spending are expected to increase significantly during FY25, while the company maintains its guidance of less than 0.5x net debt-to-equity, 30 per cent margins, and a return on equity of 20 per cent by 2025-26 (FY26).
IIFL Securities maintains an ‘add’ rating with a target price of Rs 1,250, foreseeing sustained increases in land pricing and infrastructure development at Palava City benefiting future cash flows and the net asset value of the company.
Following a steady FY24, Oberoi Realty has established a strong asset base poised for monetisation over the next few years.
The company has expanded its development portfolio, including the Gurugram project (14.8 acres) and Mumbai/Thane properties such as Adarsh Nagar, Worli (620,000 sq. ft), Tardeo (260,000 sq. ft), and Pokhran Road (6.24 acres), with a gross development value ranging from Rs 13,000 crore to Rs 15,000 crore.
In the near term, Oberoi Realty is expected to launch its Pokhran Road project, driving volumes in FY25, with additional launches planned for FY26, including the Tardeo Redevelopment Project, Gurugram, and Adarsh Nagar.
Analysts Rahul Jain and Tanvi Tambat of Elara Capital highlight that Oberoi Realty has an estimated unsold inventory of Rs 18,000 crore in high-velocity micromarkets like Goregaon and Borivali, providing earnings visibility for the next four years based on the FY24 pre-sales run rate.
They also note the company’s financial prudence, evident in its strong balance sheet and industry-best net gearing ratio of less than 10 per cent. Elara Capital maintains a ‘buy’ rating with a target price of Rs 2,350 per share.
