Stocks to buy today: With the multi-year breakout in the Nifty real estate index, new orders and better earnings prospects for the real estate sector, HDFC Securities is very optimistic about the real estate sector over the long term. The brokerage firm believes the sector could face headwinds in the short term, but the long term story remains intact. It believes DLF, Oberoi Realty, Phoenix Mills, Brigade, and Mahindra Lifespaces stocks can be good real estate stocks to buy for the long term today.
Highlighting the robust pre-sale momentum in the real estate sector; The HDFC Securities report said, “The revaluation of real estate stocks took both the streets and us by surprise, with the Nifty Realty Index outperforming the Nifty Mid-Cap 50 Index by 63 percent over the past year. That was the sector where the extent of the outperformance was above our forecasts. The pandemic was a catalyst for accelerating market share gains into the hands of organized real estate players. Banks, equity investors, buyers and supply chains have teamed up with stronger developers to help drive this change. “
The reason for the uptrends in DLF and Oberoi Realty stocks is stated in the brokerage report: “Driven by the economic / income recovery / solid wealth accumulation in the stock markets, the eight largest cities in India are experiencing strong growth momentum. We see that the demand for larger properties has increased. Buyers chase the best property developers as the demand for land, independent floors, and low-rise buildings grows. Buyers are flexible about net present values beyond a certain pre-set threshold in case a project is good. You are ready to spend more. Payment elasticity is now higher in the luxury segment and developers like DLF and Oberoi will benefit from it. “
In a departure from tradition, some of the developers, buoyed by market sentiment, have begun to announce pre-sale numbers ahead of results. In addition, the brokerage research expects DLF pre-sales of more than ₹10 billion (brigade – ₹10 billion and Mahindra habitats – ₹3 billion). The pre-sales momentum can continue into the Christmas season, with an additional delta likely to form due to new product launches.
“We expect Prestige, Oberoi and GPL to break 22 new records in the third quarter of fiscal year if launches stay on track,” said the HDFC Securities report.
Highlighting 2nd quarter earnings trends FY2021-22 for the real estate sector; The brokerage firm said, “We expect Total Revenue / EBITDA / PAT for the coverage universe to grow 22/31/0 percent sequentially. The impact of commodity prices will subside during the project completion period as companies take the blow.” In our estimation, the non-Mumbai developers will have to put up with a price hike of around 5-6 percent to absorb commodity inflation, while a higher realization on Mumbai projects could warrant a 2-3 percent hike in recovery and developers can derail do not continue with the same. “
On real estate stocks that can be bought today; The HDFC Securities report said, “Although the sector may face headwinds in the short term, the long term story remains intact. We continue to believe that Tier 1 developers will gain market share as consumers increasingly choose to buy well-known developers on projects under construction. ” We remain positive about the sector. Our top picks are DLF, Oberoi Realty, Phoenix Mills, Brigade and Mahindra Lifespaces. “
Disclaimer: The views and recommendations made above are those of an individual analyst or brokerage firm and not of Mint.
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