Even as the markets corrected by a tad bit in today's trade, Nifty managed to settle above 14550 after hitting fresh highs. Now as there is an improved sentiments for many of the sectors, there is bullish sentiment even for the realty sector. This is in the anticipation of increasing sales number, lower inventory and likely increase by over 10% in 2 years time.
Jefferies' is of the view that 2021 will see an emergence of a new residential cycle as both end users as well as investors shall get back into action. Also, in case the tech hiring stands strong, then there shall be seen resilience in office demand too going ahead in the second half of calendar year 2021. And now amid such hopes, the investment and research firm has given a buy call on 5 realty stocks and raised price targets by up to 25 percent.
Now as the sector in January 2021 alone has outperformed with gains of 8.5% so far, there is expected traction in listed realty names as there is seen a shift in consumer preference as well as consolidation.
Realty stocks given a Buy rating by Jefferies:
DLF (TP: Rs 285)
The company sees an up to 15% rally in the counter as it sees the company to just be right in its timing of adopting the policy to sell at the construction stage for the residential segment. Earlier the company used to sell the project as it nears completion stage. Also, the company's business stands to benefit in the NCR region given no aggressive competition in the market there.
Godrej Properties (TP: Rs 1,752)
For this relaty pick, the company sees an upside of up to 19 percent to hit target price levels. And as per the firm as and when the property upcycle shall be seen, the company would benefit on two fronts i.e. rising market-share and an expanding market. The realty firm is now the largest listed residential property company.
Oberoi Realty (TP: Rs 682)
An upside of 16.5 per cent will be needed to hit the target price set by the brokerage firm. For the counter, a sharp pick-up in property sale has been a major tailwind. Jefferies noted that reduction in development charges announced by the Maharashtra government will also benefit the realty major.
Sobha (TP: Rs 577)
For this South-dominating market player of the realty segment, the brokerage firm sees up to 20 percent upside given the rising pre-sales to record levels as well as improved market sentiment. The brokerage firm expects Sobha Ltd to grow by 37 per cent over FY21E-23E as new launches help drive growth. "The pick-up in the residential cycle, and within that Sobha's own strong performance, comes as a much-needed respite," the brokerage firm noted.
Prestige Estates Projects (TP: 357)
The research and brokerage firm expects Prestige Estates Projects' residential pre-sales to rise from Rs 3,800 crore in FY20 to Rs 5200 crore in FY23, even surpassing its previous peaks. The target price by Jefferies is based on a roll forward to FY23 and a lower cap rate (8 per cent) to its remaining lease assets.