Macrotech, Godrej Properties and Prestige Estates are Jefferies’ top 3 real estate stocks. Here’s why

By admin On Jan 10, 2023

Global brokerage firm Jefferies is bullish on select largecap and midcap real estate stocks, citing RBI’s rate hike cycle nearing an end and strong sales figures. With a fall of around 11 per cent, the Nifty Realty index underperformed the benchmark equity index NSE Nifty (up 4.3 per cent) in 2022 due to rising interest rates.

The overseas firm believes that real estate stock may outperform in 2023. Shares of real estate major Godrej Properties may touch Rs 1,750, indicating an upside of around 44 per cent from the current market price of Rs 1,216.90 on January 10. Likewise, Jefferies thinks that other real estate players such as Macrotech Developers and Prestige Estate may hit Rs 1,275 and Rs 575, respectively going ahead.

Earlier, shares of Godrej Properties retreated nearly 35 per cent in the previous calendar year. Macrotech Developers and Prestige Estate also lost around 12 per cent and 2.35 per cent, respectively, in 2022.

The domestic housing market has seen volumes surge of around 25 nearly YoY in 2022, to record highs, and Jefferies expects the upturn to enter its third year in 2023. “The mortgage rates have risen by around 200 basis points from their lows in 2022, though as the rate hike cycle probably peaks, mortgage rate hikes should be behind us by early 2023. Pricing sentiment is much more important for demand. We should see positive sentiment for home buying to continue in 2023,” Jefferies said.

The brokerage also has a ‘Buy’ rating on DLF with a target price of Rs 427. Shares of the company closed 0.21 per cent down at Rs 373 on January 10. On the other hand, it has a ‘Hold’ rating on Oberoi Realty with a target price of Rs 870. Shares of the real estate major settled 0.97 per cent down at Rs 851.25 on Tuesday.

“With the domestic segments of the economy looking set to outperform the export-linked IT sector in 2023, we believe the demand contours will change. The higher-end market sales are also sitting on a higher base. For 2023, we would favour the mid-market of domestic economy-linked cities with Mumbai and Delhi. Between the two cities, Mumbai is positioned better as the sharp 20-30 per cent jump in the Delhi market has made the market more investor driven,” Jefferies said in a report on January 8, 2023.

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