2 Real Estate Stocks on Track For Superior Returns

  • Stock Market Analysis

The S&P BSE Realty index gained 2.9% on December 10 in contrast to BSE Sensex 's 0.035% slump. The former's 5.42% weekly gains surpassed Sensex's 2.31% gains during the same period with a higher margin. However, the BSE Realty index declined 6.24% in a month compared to a 3.18% fall in Sensex in that period. The realty index jumped 22.84% in three months, 41.76% in six months, and 78% in a year. During the same period Sensex gained 0.83%, 12.4%, and 27.91% respectively. Real estate stocks took a back seat amid Omicron variant fears. However, as the fears regarding Omicron receded in the last couple of days, they made a strong come back. We have revisited two stocks in this space that were earlier covered. Analyzing them after second-quarter results, we felt that they continue to hold the potential to generate solid returns in the medium term.

1. DLF (NS: DLF ) Ltd

DLF Ltd is a real estate development company in India. It develops residential, commercial, and retail properties across the country. With a financial year-to-date presales of Rs 2,500 crore, the real estate firm is well on course to surpass FY2022 Rs 4,000 crore guidance, supported by 7.7 million square feet launches in the second half of FY2022 and traction in luxury and premium segments. You should note that DLF is reviving its office capital expenditure plan and going ahead with the price rise in the premium segment. Better price realization, strong office collection (at 100%) along with record sales in the super-luxury segment, healthy balance sheet driven by debt reduction should drive the company’s top-line growth in H2FY2022. What is noteworthy with DLF’s balance sheet is its cash surplus of Rs 760 crore which remains highest in the past five years.


In the second quarter of the 2021 quarter, DLF posted consolidated net sales of Rs 1,480.9 crore, down 8% year-on-year from Rs 1,609.8 crore in Q2FY2021. EBITDA declined 1% at Rs 458.3 crore from Rs 463.1 crore in the year-ago period. Profit after tax jumped 66% y-o-y at Rs 378.1 crore in the quarter. Promoters hold a decent 74.95% in the company. Noteworthy is FIIs/FPIs, DIIs and mutual funds have marginally raised their stake in September 2021 quarter. The scrip appears good based on key technical indicators such as RSI, Momentum, MACD, and 10-day/20-day/30-day/50-day/100-day/200-day EMA.

2. Sobha Developers Ltd. (NS: SOBH )

Sobha Ltd is engaged in the construction, sale, and development of housing projects, townships, and commercial premises. The company has been quietly shifting its focus from the Bengaluru markets to other markets such as Chennai, Gurgaon, Pune, and Kerala. Notably, the non-Bengaluru market accounted for 41% of total presales volume in the September 2021 quarter as against 26% in June 2021 quarter. Sobha’s launch pipeline stands at 10.8 million squarer feet. The company has planned 43% of launches for markets other than Bengaluru. It increased the price of a few of its projects by 2%-7% to offset rising input costs. The company anticipates a 25%-30% price hike in the next two to three years.


In September 2021 quarter, Sobha reported consolidated net sales at Rs 819.1 crore, up 56.9% year-on-year, from Rs 522.0 crore in the year-ago quarter. The company’s EBITDA jumped a solid 50.3% at Rs 155.7 crore from Rs 103.6 crore in Q2FY2021. Profit after tax skyrocketed a whopping 198.1% at Rs 483 crore as against Rs 162 crore in the second quarter of fiscal 2021. Although FII holdings have marginally gone down, the number of FIIs has increased from 127 to 142 in September 2021 quarter. Mutual funds raised their stake by 0.77% in the quarter to 12.04%. The stock looks good based on key technical parameters such as RSI, Momentum, MACD, and 10-day/20-day/30-day/50-day/100-day/200-day EMA.      

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