S&P BSE Realty
index was up 8.71% on September 23 compared to
's 1.63%. The former's 16.87% gains in a week were far higher than Sensex's 1.26% gains during the same period. BSE Realty was up 33.16% in a month, 41.96% in three months, 44.5% in six months, and 135.87% in a year. Real estate stocks have been advancing for the last couple of days in hopes of economic recovery. We have picked up two stocks in this space that can generate decent returns for investors in the medium to long 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. The company has sustained business performance despite its operations being impacted by the second Covid-19 wave. The management appears confident in the growth cycle in the residential market. DLF has scaled up new projects in Delhi and Gurugram. In FY2022, the company will likely add 8 Million Square (NYSE: SQ ) Feet (or MSF) to the residential portfolio. According to management guidance, they expect Rs 37-38 billion rentals in FY2023, which should reach Rs 44 billion by FY2024‐25. The increased pace of vaccinations should result in FY23E commercials touching 90% of pre‐covid levels. The golf course extension launching will likely boost the revenue. In the recent past, DLF has demonstrated a solid capability to encash its land bank faster. It should continue to monetize its land bank of 152 MSF in the subsequent years.
On the P&L and balance sheet, DLF's debt levels have come down over the last few quarters. It is likely to do so in the coming quarters. The company has also brought down its operating cost to align with the fall in revenue. Successful reduction in finance costs led to cash saving to the tune of Rs 800 million. In Q1FY2022, Net sales bookings jumped 567% to Rs 1,014 crore from Rs 152 crore in Q1FY2021. Revenue grew 92% year-on-year to Rs 1,243 crore whereas EBITDA skyrocketed 400% to Rs 498 crore. From a net loss of Rs 72 crore, DLF posted Rs 339 crore profit in the first quarter of fiscal 2022. While there wasn't any change in promoters' holding, mutual funds marginally upped their stake in June 2021 quarter. Major technical indicators such as RSI, MACD and, 20-day/50-day/100-day EMA indicate a 'buy on the stock.
2. Hemisphere Properties India Ltd (NS: HEML )
Hemisphere Properties India Ltd is a real estate company that acquires, develops, manages, and sells commercial buildings, industrial sheds, offices, house buildings, and hotels in India. It is also a custodian of land owned by erstwhile VSNL (now Tata Communications Limited (NS: TATA )). At present, HPIL owns/manages 739.69 acres of land, transferred to it in terms of the scheme of arrangement. Post transfer, the company will initiate to develop and/or transfer the surplus land. Hemisphere has begun calculating the fair value of land banks located in Delhi, Kolkata, Pune, Chennai, and Chattarpur. Market participants believe that HPIL's landholding is valued at a minimum four times higher than its market cap. Investors bet on the future development prospects of HPIL's huge land bank across major cities. The Central Government, a custodian of this land bank, will dispose of it in due course of time to realize the enormous property values.
In June 2021 quarter, mutual funds marginally increased their holding, whereas promoters' stake remained unchanged at 51.12%. The stock has a 'buy' recommendation based on key technical indicators such as RSI, awesome oscillator, momentum, MACD, and 20-day/50-day/100-day EMA.
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