The index gained 4.12% over the past five days compared to S & P’s 0.43% return. Looking back, we find that while the Realty Index was up 0.49%, it was up 5.11%. The trend is clearly pronounced over a period of six months. While the 30-stock benchmark index was up 22.08% over the past six months, the Realty index was up a staggering 79.33%. The pandemic highlighted the importance of working from home (or WFH) to keep the economy going. WFH, in turn, drove the demand for larger homes in non-metro cities mainly from the extremely affluent, mobile workforce in India’s IT sector. As the Indian economy beats the Covid19 blues, the real estate sector will be a big beneficiary. We have developed two real estate stocks that have performed well and have strong potential for reasonable returns in the short to medium term.
1. Prism Johnson Limited
Prism Johnson, formerly Prism Cement (NS 🙂 Limited, is a building materials manufacturer. The company’s product range extends from cement, ready-mixed concrete, tiles and bathroom products. The company has three business lines namely cement, tiles and bath products – H&R Johnson (India) and ready-mixed concrete – RMC (India). The cement business contributes ~ 46% of total sales, followed by HR Johnson ~ 33%. The remaining ~ 16% comes from ready-mixed concrete (or RMC) and insurance contributes ~ 5% each. The company has expanded its capacity for cement to 7.9 MTPA and tiles to 68 million m2 by 2023. Further capacity growth is also expected through the elimination of bottlenecks at the Madhya Pradesh plant. Prism Johnson is also considering increasing milling capacity at its Satna, MP, mill to 1.0 MTPA. Increasing the capacity of the company’s own power plants should pave the way for improved operational efficiency, which ultimately leads to cost reductions. Overall, capacity expansions, a strong regional presence, operational efficiency and better utilization should lead to better margins and sales growth. The government’s focus on infrastructure, Pradhan Mantri Awas Yojana and PM Gram Sadak Yojana, as well as rising input costs to the real estate sector bode well for Prism Johnson’s sales and net profit growth.
In the September quarter of 2021, Prism’s consolidated total revenue increased 11.23% to Rs 1349.99 billion from Rs 1213.68 billion in the second quarter of fiscal 2022. EBITDA for the quarter remained at Rs 169.84 billion, an increase of 5.4% from Rs 161.19 billion. Net income increased marginally to Rs 45.36 billion in Q2FY2022 compared to Rs 44.60 billion. The company’s net income CAGR is 45% for a period of five years quite impressive. However, the return on equity CAGR for three years was 12%.
It is noteworthy that the proportion of promoters is still very high at 74.87%. FIIs / FPIs increased their share slightly in the September quarter of 2021. The scrip looks very attractive based on key technical indicators such as RSI, MACD, momentum and 10-day, 20-day, 30-day, 50-day, 100-day and 200-day EMA.
2. Prestige Estates Projects Limited (NS 🙂
Another lucrative property is Prestige Estates Projects. The company owns and operates real estate. It builds, develops and rents residential, commercial and retail space. PEPL’s 3.5 million square feet (or MSF) gross home bookings increased 88% in value year over year to Rs 21.1 billion in the second quarter of fiscal 2022. The company is considering starting three new projects in Mumbai. In the second half of fiscal 2022, the company has a solid pipeline of ten MSFs. The Prestige City has a total of 12.8 MSF of which PEPL was able to sell more than 800 lots on 1.7 MSF at Rs 5,000 psf. According to the company, it has a broad pipeline of 10 MSF launches in residential areas slated for H2FY2022 in Noida (NCR), Mumbai and South India. Prestige Estates is targeting annual exit rental income of Rs 3.5 billion by March 2022.
Promoters own a whopping 65.48% of Prestige Estates, and their stake has remained unchanged over the past eight quarters. The scrip looks very attractive based on key technical indicators like RSI, Momentum, MACD and 10-day / 20-day / 50-day / 100-day / 200-day EMA.