Realty stock hits 52-week high after Motilal Oswal Financial Services initiates coverage with ‘buy’ rating

Sunteck Realty shares soared to a 52-week high on Thursday after brokerage Motilal Oswal Financial Services initiated coverage on the real estate stock with a ‘buy’ rating and a target price of Rs 640. The stock of the Mumbai-headquarter real estate developer jumped by as much as Rs 34.4, or 7.3 per cent, to Rs 502.7 apiece on BSE, surpassing an existing 52-week peak of Rs 486 registered in mid-October.  

The brokerage’s target for the real estate stock suggests an upside of 37 per cent from the previous close.  

Why Motilal Oswal Financial Services is positive on Sunteck Realty? 

Sunteck Realty’s multi-micro-market presence, luxury offerings across price points, and proven execution track record have made it one of the biggest beneficiaries of strong demand, the brokerage said in a research report.  

The company is likely to register a CAGR of 25 per cent over FY23-26 to reach Rs 3,100 crore, as it is gearing up for 2-3 new project launches, and its strong balance sheet, robust cash flows and recent platform with IFC would enhance its future growth potential, analysts at Motilal Oswal wrote in the report.  

“We also anticipate Sunteck to deliver Rs 4,500-5,000 crore worth of units at its projects in Naigaon and Goregaon, driving 72 per cent revenue CAGR over FY23-26 and multi-fold growth in PAT to Rs 350 crore,” according to the brokerage.  

Sunteck Realty is a major real estate developer in the Mumbai Metropolitan Region (MMR), the largest micro-market in the country, which has reported 70 per cent higher absorption than pre-COVID levels, Motilal Oswal said.  

The brokerage, mentioned the following key risks to upside:  

--Delay in the launch of new projects 

--Subdued sales velocity, which would lead to a longer monetisation timeline and lower discounted value 

Earlier, Prabhudas Lilladher also maintained a ‘buy’ call on the counter with a target of Rs 565 apiece.  

The adoption of an asset-light model has enabled the real estate company to acquire scale without straining its balance sheet, which will likely continue in new project additions too, according to the brokerage. 

Sunteck Realty shares: Past performance 

Sunteck Realty shares have delivered a return of 28 per cent in the past year, underperforming a 58.5 per cent rise in the Nifty Realty index though sharply outperforming an 8.4 per cent gain in the headline Nifty50 gauge.  

In October, Sunteck Realty was among the top 10 buys by Aditya Birla SunLife AMC. As against its previous holding of 0.11 crore in September, the AMC upped its holding to 0.15 crore.