Top Stock Picks: HDFC Securities Recommends 8 Real Estate Stocks To Buy Ahead of 4QFY22 Results

HDFC Securities is optimistic on the real estate sector and has given 'Buy' ratings to DLF for a target price (TP) of Rs 486, Oberoi Realty for a (TP) of Rs 1,142, Phoenix Mills for a (TP) of Rs 1,364, Brigade Enterprises for a (TP) of Rs 619, Prestige Estates for a (TP) of Rs 633, and Mahindra Lifespaces for a (TP) of Rs 473, Sobha Developers for a target price of Rs 1,000, Kolte-Patil Developers for a (TP) of Rs 381 and also have 'Add' tag on Godrej Properties shares (TP: Rs 1,804).

The brokerage has said "We expect Q4FY22 presales to largely remain in line with Q3FY22 sales (some developers may see decline, depending on miss of new launch timelines due to COVID-19 third wave). Our channel checks picture a stable underlying demand, though it may vary, depending on location and developer projects. Whilst Q4FY22 was a muted launch quarter, we expect launch momentum to pick up from Q1FY23, with some of the major launches from Prestige (MMR, most awaited), Oberoi (Thane, long due) and Mahindra Life (Bengaluru, Chennai). We expect launches to result in a strong Q1FY23 in the absence of any COVID-19 fourth wave."

HDFC Securities has said "On the back of all-time high affordability, demand remains robust and tier1 developers continue to gain market share. Rising income levels, near-low mortgage rates, and stable property prices are some factors contributing to the strong demand. Whilst globally interest rates are expected to harden, the same is reflected in the ~50bps increase in India 10-yrs Gsec yield over the last month. We believe that this may not result in demand destruction as affordability remains high. Developers remain accommodative on pricing as most of them are holding a historical land bank. Whilst we expect property prices to rerate, it may be on the back of a more sustained economic recovery and positive sentiment on consumption."

"Malls saw faster consumption recovery after the second and third waves than they saw after the first one. Whilst Jan-22 and a part of Feb-22 saw the Omicron impact, Mar-22 has been robust. Discounts have been withdrawn with rentals now reverting to contractual rentals with escalations. Developers have started announcing new Capex/expansion plans. Our channel checks suggest that, while occupancies remain high, trading occupancies are lower whilst trading density is higher. Tenant churn/shops refurbishment comeback and higher trading densities may result in faster rental recovery. For offices, re-occupancies have improved from 10-15% to 25-30%, with 50% expected by Jun-22. We believe that lease momentum may pick up from Q2CY22," said the brokerage.

"Whilst Oberoi/Prestige reported decline in Q4FY22 presales as there were no major new launches, Sobha reported flattish QoQ. Macrotech was an outlier with strong presales delivery (YoY/QoQ, 37/33%). On FY22 basis, we expect our coverage universe to deliver all-time high presales. Further, we expect DLF to report presales of INR 22bn, Brigade INR 7.5bn, Mlife INR 2.5bn and GPL INR 27bn. The presales momentum may continue into Q1FY23, with incremental delta likely to accrue with new launches. We expect Prestige, Oberoi, Mahindra Life, DLF, and GPL to hit new records in Q1FY23, if launches remain on track," HDFC Securities has said in a note.

The brokerage has claimed "We expect the aggregate revenue/EBITDA/PAT for the coverage universe to grow sequentially by 17/9/6.2%. The impact of commodity prices will smoothen over the project completion period as companies will take the hit once projects complete. Overall, taking price hikes may derail recovery. We continue to believe that tier-1 developers will gain market share. We remain positively biased towards the sector. Top picks: DLF, Oberoi Realty, Phoenix Mills, Brigade, Prestige, and Mahindra Lifespaces."