Sunteck Realty share price jumps over 5%; Motilal Oswal expects a 41% upside

Sunteck Realty share price jumped over 5 per cent in morning trade on BSE on Tuesday, November 21. The stock opened at ₹474 against the previous close of ₹453.70 and rose 5.5 per cent to hit the intraday high of ₹478.50 on BSE.

Sunteck Realty share price has gained almost 38 per cent this year so far against an 8 per cent gain in equity benchmark Sensex.

Sunteck Realty is one of the leading real estate developers in the Mumbai Metropolitan Region (MMR), the largest micro-market in the country.

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Brokerage firm Motilal Oswal Financial Services has initiated coverage on Sunteck Realty stock with a buy recommendation, pegging a target price of ₹640 indicates which a 41 per cent upside from the stock’s November 20 closing price of ₹453.70 on BSE.

In a report on November 21, Motilal said it expects Sunteck to deliver a healthy 25 per cent pre-sales CAGR over FY23-26, fueled by a ramp-up in launches from both new and existing projects. Furthermore, Motilal expects Sunteck to deliver ₹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 ₹350 crore.

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Motilal Oswal believes the company’s sound balance sheet, strong cash flow, and recent partnership with IFC would spur project additions and drive a sustainable growth trajectory.

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“We value its residential segment based on the NPV of existing pipelines and its commercial segment based on an 8 per cent cap rate on FY25E EBITDA. We also assign ₹1,400 crore of value to future project additions through the IFC platform to arrive at our target price of ₹640, indicating 41 per cent upside potential,” said Motilal Oswal.

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Motilal Oswal pointed out that Sunteck’s pre-sales growth was underdue during FY14-18 (posting a 10 per cent CAGR over the period); However, it accelerated thereafter at 22 per cent CAGR over FY18-23, led by three new project launches.

The company is now gearing for the next leg of growth, with two new project launches planned in Kalyan and Nepean Sea Road. Cumulatively, the company is lining up ₹5,700 crore of launches from new projects ( ₹2,200 crore) and successive phases in existing projects ( ₹3500 crore) over the next two to three years, the brokerage firm said.

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However, key risks, as per Motilal Oswal, include a delay in the launch of new projects and subdued sales velocity which would lead to a longer monetization timeline and a lower discounted value.

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