· We have downgraded our estimates for the real estate stocks under
our coverage to reflect the deteriorating macro environment. We have
modified our WACC assumptions to factor a higher risk free rate of 9.5%
(8.2% earlier) and Equity beta of 1.30x (1.25x).
· We believe that slowing demand for both commercial and residential
real estate, coupled with difficulties being faced by developers in raising
funds from external sources will lead to delays in launches of new projects,
and have factored the same into our forecasts, thereby lowering our EPS and
NAV estimates.
· We have further increased discounts to NAVs to arrive at target
prices for the stocks we cover, as we believe that in the near term stocks
may trade below NAVs given liquidity constraints and pressure on property
prices, as has been observed with regional peers in the past. However, we
feel that long term investors would be well served to look at NAV
valuations, as we believe that companies should at least realise their NAVs
in the long term.
· Accordingly, we downgrade DLF and Parsvnath to UNDERPERFORM from
NEUTRAL, Unitech and Sobha to NEUTRAL from OUTPERFORM, and upgrade IBREL to
NEUTRAL from UNDERPERFORM on valuation grounds.
*Summary of changes:*
DLF Ltd (DLF.BO, Rs455.80, Downgrade to UNDERPERFORM [V], TP Rs341.95 EPS:
▼TP: ▼)
Unitech Ltd (UNTE.BO, Rs163.65, Downgrade to NEUTRAL [V], TP Rs174.83 EPS:
▼TP: ▼)
Sobha Developers Ltd (SOBH.BO, Rs254.05, Downgrade to NEUTRAL [V], TP
Rs275.26 EPS: ▼TP: ▼)
Parsvnath Developers Ltd (PARV.BO, Rs113.15, Downgrade to UNDERPERFORM [V],
TP Rs96.25 EPS: ▼TP: ▼)
TP Rs307.60 EPS: ▼TP: ▼)
Download the reports on:
 IBREL_150708.pdf |
| | DLF_150708.pdf |
| | Parsvnath_150708.pdf |
| | Sobha_150708.pdf |
| | Unitech_150708.pdf |
| | India_property_150708.pdf |
No comments:
Post a Comment