ICICI Direct Recommends Buy This Small Cap Real Estate Stock, Sees Robust 26% Returns

ICICI Direct is bullish on NESCO Ltd, a small-cap real estate sector company having a market cap of Rs 4,509.44 crore. The brokerage recommends "buy" stock of the company for gains up to 26% with a target price of Rs 800 per share.

Nesco Ltd (Nesco) is in the business of development and management of commercial / IT-ITES Real Estate, Exhibition centre and foods business. It manages two commercial with leasable area of 1.75 msf (mn sq ft) and BEC spread over 0.6 msf. As part of its future plans, the company has outlined a capex plan of ~ Rs 2400 crore to (i) build ~2.6 msf sq leasable area commercial Tower along with a 350 keys 4-star Hotel and ii) refurbish and expand the BEC.

Stock Outlook & Returns

The share price of NESCO on NSE is Rs 638.05 apiece, gaining 2.97%. The stock surged 4.4% in the last 1 week and 9.68% in the last 1 month, respectively.

In 3 and 6 months, it has given 11.5% and 20.58% positive returns, respectively. However, in the past 3 months, the returns declined, giving 5.42% positive returns. It has given a maximum of 22.7% positive returns in the last 5 years.

The stock hit the 52-week high recently on 09 September 2022 at Rs 686.45 and the 52 week low on 20 June 2022 at Rs 501.95, respectively.

 

Q2FY23 Update

Nesco business is finally seeing an improved outlook with pick up in exhibition business and better occupancy at IT park.

Q2FY23 reported revenues were up 76.9% YoY at Rs 142.9 crore. The exhibition revenues at Rs 53.1 crore was up by ~25x YoY on a depressed base, led by full-fledged resumption of exhibition. The IT park revenues were up 11.9% YoY at Rs 73.1 crore, with overall occupancy at Tower 4 is at ~97% (vs. 92% in FY22), while IT Tower 3 is at ~90% (vs. 80% in FY22). 

EBITDA at Rs 100.1 crore, was up ~101% YoY driven by operating leverage, with margins at 70.7%, up 840 bps YoY and PAT at Rs 81.9 crore was up 86% YoY, aided by strong operating performance.

 

Buy For Rs 800 target price

Nesco's share price was up ~21% over the past five years. "We maintain BUY rating to the company. With improved occupancies in IT park and recovery in exhibition business, earning recovery is likely to be sharp, going ahead. We value Nesco at Rs 800/share," the brokerage has said.

Key triggers for future price performance

ICICI Direct said, "We expect exhibition business to recover sharply to attain pre-covid run rate. Improving occupancy in the IT park segment and strategic sweet spot in Goregaon micro market to provide sustained demand for current as well as planned capex in medium to long term."

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. 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 making any investment decision.