Why Analyst Sees This Small Cap Stock Surging 45% Even As Revenue Slumped 52% In Q3

Shares of Sunteck Realty have remained under pressure as the company’s December quarter results seemingly unimpressed investors. However, analysts at Motilal Oswal think the company is on the right track to turn things around.

The Sunteck Realty Analyst: Pritesh Sheth-led analyst team Motilal Oswal maintained the “buy” rating for the stock with a target price of ₹640. The target indicates a 45% upside from the stock’s last closing price of ₹441.15.

The Sunteck Realty Thesis: Sunteck Realty reported a 52% YoY decrease in revenue, reaching ₹42.4 crore in the third quarter of FY24. However, analysts noted that this was a 70% increase on a sequential basis. The company reported an operating loss of ₹14.8 crore, compared to an EBITDA of ₹18 crore in the same quarter last year. The net loss stood at ₹9.8 crore, contrasting with a profit after tax (PAT) of ₹2.1 crore in 3QFY23.

The brokerage anticipates a substantial improvement in financial performance in the Jan-March quarter, driven by progress on the Maxx World project in Naigaon, which is expected to contribute ₹750-800 crore to its revenue.

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In terms of pre-sales, Sunteck Realty reported 3QFY24 figures of ₹450 crore, reflecting a 15% increase YoY and QoQ. The 9MFY24 bookings amounted to ₹1,240 crore, indicating a 16% YoY increase. The analysts said that the company’s bookings were well on track to hit its targets.

The analysts also highlighted that thanks to a strong surplus cash position, the net debt for the company reduced to ₹49 crore in 3Q from ₹260 crore in 2QFY24.

The brokerage expects the company to achieve a healthy 25% pre-sales CAGR over FY23-26, driven by increased launches from new and existing projects. With a robust balance sheet, strong cash flows, and a recent partnership with IFC, Sunteck is poised for sustainable growth.

Price Action: Shares of Sunteck Realty were up 0.39% to trade at ₹442.85 on Wednesday.

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