Small-cap Realty stock which is one of India’s leading Luxury real-estate developers, gets a ‘Buy’ tag on it from Motilal Oswal Financial Services Limited, with an upside target potential of 36 percent from its current market price.
Sunteck Realty Limited
With a market capitalization of Rs. 6,872 Crores, on November 22, 2023, the shares of Sunteck Realty Limited were trading at Rs. 468.70, down 0.76 percent from its previous day close price of Rs. 472.30.
Motilal Oswal Financial Services Limited, one of the well-known Investment Banks, has given a ‘Buy’ tag to the company’s stock with a target price of Rs 640 indicating a potential upside of 36 percent as per the current market price.
The rationale behind providing such a recommendation pertains to various trigger points Comprising, Sunteck Realty is one of the leading real estate developers in the Mumbai Metropolitan Region (MMR), which is the largest micro-market in the country.
Sunteck has identified untapped, high-growth potential markets in MMR through its project acquisition strategy. It has expanded into BKC, Goregaon, Naigaon, Vasai, Vasind, and Kalyan over the years.
To mitigate market risk, Sunteck has transitioned from a land-ownership model to an asset-light approach, with initial investments at 1-2 percent of GDV. Higher operating margins (due to premium pricing) and low capital investments have enabled the company to clock a healthy IRR of 20-25 percent.
Its three new project launches resulted in a 22 percent pre-sales CAGR during FY18-23 and it is likely to post a 25 percent CAGR over FY23-24 as it is gearing up for 2-3 new project launches The company has lined up projects worth Rs. 57 Billion from new projects launches and existing projects over the next 2-3 years.
The company is expected to deliver a 25 percent CAGR in pre-sales to Rs. 31 Billion through FY26. In addition, the company is also looking to add projects with a GDV potential of Rs. 150-200 Billion with the aim of doubling pre-sales over the next 3-4 years.
Sunteck has recently formed a Rs. 7.5 Billion joint development partnership with IFC for developing ~12,000 affordable and mid-income homes in large-scale urban housing projects. This partnership would enhance Sunteck’s growth capability.
Historically, Sunteck has maintained a disciplined balance sheet, which ensures that leverage has not exceeded 0.5x of equity. It generated an operating surplus of Rs. 9.5b over FY21-23, which helped reduce the net debt to Rs. 2.6 Billion, bringing the net debt to equity down to 0.1x. This leaves a lot of headroom for growth.
According to the company’s financial statements, Sunteck Realty Limited’s Revenue from operations declined 29 percent from Rs. 513 Crores in FY22 to Rs. 362 Crores in FY23, accompanied by a profit of Rs. 23 Crores to a loss of Rs. 5 Crores.
It has reported a return on equity (ROE) of 0.05 percent and a return on capital employed (ROCE) of 2.58 percent, it is not making good returns on its equity and capital employed.
According to the latest shareholding data available for the September 2023 quarter, the company’s Promoters hold a 67.22 percent stake, Domestic Institutional Investors hold 6.99 percent and Foreign Institutional Investors hold 16.67 percent.
Sunteck Realty Limited is one of India’s leading Luxury real-estate developers, it is engaged in the development of residential and commercial projects. It develops projects under six brands namely Uber luxury residences, Ultra luxury residences, Premium luxury residences, Marquee Luxury Destination, Aspirational luxury residences, and Commercial and retail developments.
Written by: Bharath K.S
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
