Motilal Oswal initiates coverage on this multi-bagger real estate stock, sees nearly 27% upside

Motilal Oswal has initiated coverage on NSE-listed Kolte Patil Developers with a 'buy' rating on the back of the company's strong growth in pre-sales bookings. The brokerage further believes the real estate company's past track record indicates that future growth will be supported by profitability and cash flows.

With a target price of Rs 700 apiece, the brokerage sees a 26.9 per cent upside from Wednesday's closing price. The brokerage expects Kolte Patil Developers' gross margin to recover to 34 per cent by FY26, as the impact of a nine per cent compound annual growth rate (CAGR) in realisation over FY21–23 will be realised in profit and loss with a lag. 

As a result, according to the report, the earnings before interest, tax, depreciation, and amortisation (EBITDA) margin is likely to improve to 17 per cent in FY26 from nine per cent in FY24. 

Profit after tax (PAT) margin is also likely to recover to eight per cent in FY26E, resulting in a PAT of Rs 160 crore and a return on equity (RoE) of 14 per cent, similar to what the company clocked in FY18.

Analysts at Motilal Oswal believe, given the company's strong pipeline, it is likely to maintain a 25 per cent CAGR in pre-sales for at least the next two years, with further room for growth from new project additions.

As per the report, the company now has a robust project pipeline and ample balance sheet capacity to target new projects and maintain growth.

The brokerage sees the inability to add new projects as intended and any slowdown in demand momentum as the key risks. 

At around 12:24 p.m., shares of Kolte Patil Developers traded over 2 per cent higher on the NSE at Rs 563. 

In a year, Kolte Patil Developers shares have given a multi-bagger return of over 116 per cent against Nifty50's rise of over 27 per cent. 

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