Buy This Small Cap Real Estate Stock For Target Price Of Rs 619, Given Over 160% Returns In 3 Years

HDFC Securities in its latest report on Brigade Enterprises Ltd. published on July 20, 2022, has recommended buying the stocks of the company for a target price of Rs 619 apiece. Brigade Enterprises is a small cap real estate sector company with a market capitalization of Rs 10,980.85 crore. Brigade Enterprises presents a unique investment opportunity in a structurally strong southern real estate market. The mixed-use developer is firing from all cylinders with residential, commercial and hospitality segments delivering strong performance/recovery.

Stock Outlook

The current market price (CMP) of Brigade Enterprises is Rs 475.25 apiece, which opened at Rs 479.95 apiece. The 52-week low of the stock was recorded at Rs 292.10 a piece, while the 52-week high was recorded at Rs 554.70 apiece. The PE ratio is 132.67. PB ratio is 3.83. ROE is 2.92%. Face value is 10. TTM EPS is Rs 3.59. 

The stock has gained nearly 5.62% in the last 1 week, and 7.96% in the past 1 month, respectively. It has gained further in last 1 year, around 52.16%. In the last 3 and 5 years, its share price gained 161.27% and 164.02%, respectively.

The stock has the potential to gain 31% in 12 months based on the CMP of the stock & the brokerage's estimated Target Price. 

AR-FY22 - key operational highlights

The company achieved best ever presales of 4.7msf, with sale value of INR 30bn (+9% YoY). Average realisation was up 7% YoY to INR 6,411/sf. In rental business, 1msf was leased during the year and the company achieved 0.5msf of renewals at 14% escalation. Consumption in malls surpassed pre-COVID levels from mid-Feb'22 and, as a result, retail revenue increased by 64% in FY22. Total collections were the highest ever at INR 40bn (+51% YoY).

Management commentary

Residential: Launches in the year were lower as compared to past performances due to various delays in civic authorities. The best-performing projects in Bengaluru were Brigade Cornerstone Utopia and Brigade Eldorado while projects in Hyderabad and Chennai continued to be significant value and volume drivers.

Office: Brigade Enterprises expects to launch about 2msf of lease-and-for-sale project.

Retail: there was a recovery for multiplexes due to big box office releases. Brigade Enterprises is seeing consistent traction in leasing, with new rentals greater than 20% of the pre-COVID levels on an average.

Hospitality: restart of international flights, uptick in corporate movement, and rescheduling of mega events caused increase in corporate bookings and meetings, incentives, conferences & exhibitions (MICE). Going forward, the company expects this segment to consistently improve. As raw material is one of the primary cost components, any material fluctuation may have a significant impact on margins. Cash flow and operations may be adversely impacted in such an event as it neither enters into long-term vendor arrangements nor undertake any hedging activities to safeguard itself against commodity inflation risks. 

HDFC Securities has estimated Rs 619 apiece as target price, Suggest buy

Brigade Enterprises expects construction costs at elevated levels in FY23, with customers absorbing higher prices, as buyer sentiment is positive. To maintain profitability, Brigade Enterprises may take further price hikes. For residential segment, the overall outlook remains positive, with focus on land acquisition in key markets of Bengaluru, Chennai, and Hyderabad. The company is expanding the business portfolio by initiating a warehousing and logistics and data center vertical, which is in the preliminary stages of development

The brokerage firm said, "Over the next few quarters, we expect Brigade Enterprises to deepen its presence in Chennai and Hyderabad markets while consolidating further in the Bengaluru market. Hospitality/mall asset monetisation shall release further cash to grow residential and commercial businesses. Given Brigade Enterprises' strong cash position of Rs 15.8bn, a robust business development pipeline (added ~8.5mn sqft of land in FY22, Rs 6.8bn consideration, Rs 55bn GDV), and a healthy balance sheet, we remain constructive. We reiterate BUY, with an unchanged Target Price of Rs 619."

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.