Prestige Estates shares: Real estate stock jumps 9% ahead of Budget 2025 on Jefferies upgrade

Shares of Prestige Estates Projects Ltd climbed 9 per cent in Saturday's trade, ahead of the Union Budget 2025, as the real estate stock received a 'double upgrade' from Jefferies on likely improvement in operational performance. Jefferies suggested a 'buy' rating on a stock with a target of Rs 1,600. The stock rose 9.31 per cent to hit a high of Rs 1,489.95.

Prestige Estates expansion pains in new geographies leading to launch delays and pre-sales decline of 38 per cent in nine months appear likely to end soon, Jefferies said. It noted that projects worth Rs 30,000 crore are in advanced approval stages and should see strong demand, particularly for the mid-income projects.

"The large capex program is on track and gearing at 0.37 times provides headroom for scale-up. Upgrade to BUY with target price of Rs 1,600 (earlier Rs 1,420)," Jefferies said.

Shares of Prestige Estates declined 34 per cent since its June 2024 peak, as pre-sales declined.

"We believe the launch delays are now largely played out, demand is still good and PEPL has a strong pipeline for the quarters ahead. We adjust our pre-sales estimate for FY25/FY26 by -10 per cent/0 per cent to Rs 20,000 crore/Rs 27,500 crore, and earnings by -13 per cent/+8 per cent post the 3Q result updates. Our PT of Rs 1,600 (Rs 1,420) builds in stock trading at 15x PE to embedded profit on pre-sales. Consistent pre-sales delivery is key to rerating," Jefferies said.

Meanwhile, it noted that large NCR (TPC Indirapuram, Rs 11,500 crore) project is seeing some to-fro with RERA authorities. Two projects in Bangalore (Southern Star, Suncrest Rs43bn GDV) are also ahead in RERA approvals.

"Additionally, RERA logging is likely soon for one project each in Mumbai (Nautilius, Rs 8,700 crore), Chennai (Pallava, Rs 3,100 crore) and Hyderabad (Spring heights, Rs 3,200 crore). Management has seen strong channel feedback on these projects and expects to sell at least 40 per cent on average at the launch time," Jefferies said.