Why do these two real estate stocks look attractive?
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The index has gained 4.12% in the past five days from returns of 0.43% generated by S&P. Looking back, we observe that while it jumped 0.49%, the Realty index rose 5.11%. The trend is clearly distinctive over a six-month period. Over the past six months, while the 30-stock benchmark has gained 22.08%, the Realty index has gained a stunning 79.33%. The pandemic has underscored the importance of working from home (or WFH) in keeping the economy running. The WFH, in turn, has spurred demand in non-metropolitan cities for larger homes, mostly from the extremely well-made, location-less Indian IT workforce. As the Indian economy advances by beating the blues of Covid19, the real estate sector will be a big beneficiary. We have come up with two real estate stocks that have performed well and have great potential to generate decent returns in the short to medium term.
1. Johnson Prism Limited
Formerly Prism Cement (NS 🙂 Limited, Prism Johnson is a manufacturer of building materials. The company’s products range from cement, ready-mixed concrete, tiles and bath products. The company has three divisions, namely Cement, Tiles and Bathware – H&R Johnson (India) and Ready Mix Concrete – RMC (India). The cement business represents around 46% of overall sales, followed by HR Johnson, around 33%. The rest ~ 16% comes from ready-mixed concrete (or RMC) and insurance contributes ~ 5% respectively. The company has set out to increase the capacity of cement to 7.9 MTPA and tiles to 68 million m2 by 2023. In addition, further capacity growth is expected from the debottlenecking of the Madhya Pradesh plant. Prism Johnson is also considering increasing the grinding capacity to 1.0 MTPA at the Satna, MP plant. Increasing the capacity of captive power plants should pave the way for improved operational efficiency, ultimately leading to cost reductions. Overall, capacity expansion, strong regional presence, operational efficiencies, better utilization should lead to better margins and revenue growth. With the government’s focus on infrastructure, Pradhan Mantri Awas Yojana and Prime Minister Gram Sadak Yojana, rising input costs for the real estate industry bodes well for Prism Johnson’s revenue growth and bottom line.
In the September 2021 quarter, Prism’s consolidated total income jumped 11.23% to Rs 1,349.99 crore from Rs 1,213.68 crore in the second quarter of fiscal 2022. EBITDA for the quarter remained at Rs 169.84 crore, up 5.4% from Rs 161.19 crore. Net profit increased slightly to Rs 45.36 crore in the second quarter of fiscal 2022 from Rs 44.60 crore. The company’s net profit CAGR of 45% is pretty impressive for a five-year period. However, its three-year return on equity CAGR was 12%.
In particular, the ownership of promoters remains very high at 74.87%. FIIs / REITs increased their stake slightly in the September 2021 quarter. The script looks very appealing based on key technical indicators such as RSI, MACD, Momentum and EMA 10 days, 20 days, 30 days, 50 days, 100 days and 200 days.
2. Prestige Estates Projects Limited (NS 🙂
Another real estate that remains a lucrative bet is Prestige Estates Projects. The company owns and operates real estate. It builds, develops and leases residential, commercial and commercial spaces. PEPL’s gross residential bookings in the second quarter of fiscal 2022 of 3.5 million square feet (or MSF) increased 88% in annual value to reach 21.1 billion rupees. The company plans to launch three new projects in Mumbai. It has a strong pipeline of ten MSF launches during the second half of fiscal 2022. The launch of plots under the name âThe Great Acresâ at The Prestige City in Sarjapur, Bangalore, is expected to generate flows of cash flow in the following quarter. The Prestige City has a total area of ââ12.8 MSF of which PEPL has been able to sell more than 800 plots spread over 1.7 MSF at Rs 5,000 psf. According to the company, it has a vast pipeline of residential launches of 10 MSF lined up during the second half of fiscal 2022 in Noida (NCR), Mumbai and southern India. Prestige Estates has forecast annual rental income of Rs 3.5 billion by March 2022.
The promoters own 65.48% of Prestige Estates and their stake has remained unchanged for the last eight quarters. The script looks very appealing based on key technical indicators like RSI, Momentum, MACD and 10 Day / 20 Day / 50 Day / 100 Day / 200 Day EMA.
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