Credit Suisse
India Property Sector-How deep does the rabbit-hole go?
Sell Anantraj, Ganesh Housing, DLF, Parsvnath, Purvankara, Sobha and Unitech
· Indian real estate stocks have corrected sharply since January, and
most stocks are now trading at deep discounts to NAVs.
· We believe this scenario is no surprise, given the severe headwinds
that the sector is facing at present. Our report 'India Property Sector - the
writing is on the wall' provides several pieces of anecdotal evidence which we
believe point to a slowdown in Indian real estate.
· Discounts to NAV do not necessarily imply a buying opportunity
-regional peers have historically traded below their NAVs, and the current
situation is not restricted to India.
· We looked at the Hong Kong market for clues as to where Indian
property stocks may bottom out. We found that discounts to NAVs have
historically increased in times of weak property prices, with maximum discounts
for developers ranging between ~34-77%.
· We believe that discounts to NAV for Indian realty stocks are likely
to increase further, and persist until demand recovers. We maintain our
UNDERWEIGHT rating on the sector.
Nothing in this article is, or should be construed as, investment advice.
Shakti
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