Shares of Puravankara have rocketed at the bourses over the past year, going up over 300%. Analysts at Yes Securities see the strong bull run continuing.

The Puravankara Analyst: Abhishek Lodhiya for Yes Securities initiated coverage on the stock with a “buy” rating and target price of ₹452. The target indicates an around 53% upside from the stock’s last closing price of ₹294.

The Puravankara Thesis: Yes Securities’ analysis of Puravankara highlights the company’s strong growth trajectory and prudent risk management practices. The brokerage firm projects significant presales of approximately 10.08 million square feet (msf) over the period from Q4FY24 to FY26E, leveraging the unsold area from ongoing projects. With 11.55 msf of projects in various stages of approval, Yes Securities expects incremental presales of 5.72 msf over the same period. The conservative estimate suggests a 20% compound annual growth rate (CAGR) in presales from FY23 to FY26E.

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The realty major’s strategic focus on risk reduction and debt management is evident in its track record, the brokerage added. Despite executing only 13 msf of projects when net debt stood at ₹2,743 crore in FY19, the company has significantly reduced debt to ₹1,741 crore by Q3FY24, while executing 22 msf of projects. As per the brokerage, this feat has resulted in a considerable drop in debt per square foot and is expected to further reduce the net debt to equity ratio to 0.55x by FY26E.

With ongoing execution of 26.37 msf and plans to launch another 13.1 msf in the next 6-12 months, Puravankara is poised for robust revenue growth over the next 4-5 years. Yes Securities estimates cumulative revenue of ₹26,150 crore and profit of ₹5,970 crore over the next 7 years, driven by strong demand in the residential segment. The firm expects margins to improve from 18-22% to 30-35%, enhancing return on equity and capital employed.

Given the optimistic outlook for residential demand, Yes Securities is confident that Puravankara will sell all its projects in the next 6 years, with presales expected to grow at a robust pace.

Price Action: Puravankara’s share price was locked in the 10% upper circuit at ₹324.05 on Friday.

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