The index is up 4.12% in the past five days, compared to returns of 0.43% by Standard & Poor’s. Looking back, we note that while it was up 0.49%, the Real Estate Index was up 5.11%. The trend is clearly distinct over the six month period. In the past six months, while the benchmark 30-share index is up 22.08%, the real estate index is up a staggering 79.33%. The pandemic has highlighted the importance of working from home (or WFH) to keep the economy going. WFH, in turn, has driven the demand across non-metro cities for large houses mainly from the workforce of the Indian IT sector which is very well performing and free of locations. With the Indian economy moving forward overcoming the Covid19 blues, the real estate sector will be a huge beneficiary. We’ve come up with two real estate stocks that have performed well and have strong potential to generate decent returns in the short to medium term.
1. Prism Johnson Ltd.
Prism Johnson, formerly Prism Cement (NS:) Limited, is a manufacturer of building materials. The company’s products vary from cement, ready-mix concrete, tiles and shower products. The company has three divisions, namely Cement, Tiles and Bath Tools – H & R Johnson (India), and Ready Mix Concrete – RMC (India). The cement business contributes approximately 46% of total revenue, followed by HR Johnson with 33%. The remaining ~16% comes from ready-mix concrete (or RMC) and insurance contributes about 5%, respectively. The company has expanded the cement production capacity to 7.9 million tons per annum and tiles to 68 million square meters by 2023. In addition, the production capacity is expected to increase by removing bottlenecks at the Madhya Pradesh plant. Prism Johnson is also considering increasing milling capacity to 1.0 MTPA at its Satna, MP plant. Increasing the capacity of the captive power plant should pave the way for improved operational efficiency, ultimately reducing costs. Overall, capacity expansion, strong regional presence, operational efficiencies, and better utilization should lead to improved profit margins and profit growth. The government’s focus on infrastructure, Pradhan Mantri Awas Yojana, and Prime Minister Gram Sadak Yojana, the rising cost of inputs to the real estate sector bode well for Prism Johnson’s revenue and net profit growth.
In the September quarter of 2021, Prism’s consolidated gross income jumped 11.23% to Rs.1,349.99 crore from Rs.1,213.68 crore in the second quarter of fiscal year 2022. EBITDA for the quarter remained at Rs.169.84 crore, up by 5.4%. From 161.19 crores. Net profit slightly increased to Rs.45.36 crore in Q2 FY 2022 as compared to Rs.44.60 crore. The company’s earnings compound annual growth rate of 45% is impressive for a five-year period. However, the return on equity was a three-year compound annual growth rate of 12%.
Notably, the share of promoters is still very high at 74.87%. FIIs / FIIs slightly increased their share in the September quarter of 2021. Scribe looks very attractive based on major technical indicators such as RSI, MACD, Momentum, 10d, 20d, 30d, 50d, 100d and 200d. .
2. Prestige Estates Projects Limited (NS 🙂
Other properties that remain a profitable bet are Prestige Estates. The company owns and manages real estate. It builds, develops and leases residential, commercial and retail spaces. PEPL’s total residential bookings for the second quarter of fiscal 2022 of 3.5 million square feet (or MSF) grew 88% year-on-year in value to Rs 21.1 billion. The company is considering launching three new projects in Mumbai. It has a strong pipeline to launch ten Unlimited Crews in the second half of the 2022 fiscal year. The launch of plots of land under the name ‘The Great Acres’ at The Prestige City in Sarjapur, Bengaluru should drive cash flow in the following quarter. The area of Prestige is 12.8 MSF which PEPL has been able to sell over 800 plots of land spread over 1.7 MSF at the price of Rs 5,000. According to the company, it has a wide range of residential launches of 10 Nomads in the second half of 2022 across Noida (NCR), Mumbai and southern India. Prestige Estates was guided to have an annual rental income of Rs 3.5 billion by March 2022.
Promoters own a significant 65.48% of Prestige Estates and their holdings have remained unchanged for the past eight quarters. Scrib looks very attractive based on major technical indicators such as RSI, Momentum, MACD, 10 days / 20 days / 50 days / 100 days / 200 days.