Multibagger stock Suraj Estate fell 29% from recent peak. Is this a good opportunity to buy?

Multibagger Stock: Shares of Suraj Estate DevelopersA real estate construction company has come under heavy selling pressure, with its stock falling 29% 603 each in less than three months. This correction follows a sharp, sideways surge in the stock price between March and August 2024, resulting in a massive 222% gain.

Despite recent volatility, analysts remain optimistic about Suraj Estate’s prospects, especially after its strong Q2FY25 performance. Most analysts maintain a positive outlook on the company, with some even raising their target prices, suggesting the stock could rally in the near term.

Domestic brokerage firm Nuvama Professional Clients Group has raised its target price for the stock. From Rs 992 per share 935 maintains its ‘Buy’ rating.

The brokerage’s optimistic outlook is based on Company’s strong project lineup and healthy launch pipelineIts leading position in the redevelopment segment in South-Central Mumbai, strong cost advantages, and a proven track record in redevelopment of 33(7) projects.

Additionally, the brokerage said the company benefits from a large addressable market and a healthy balance sheet with predictable cash flows.

Similarly, Arihant Capital Markets remains positive on Suraj Estate, citing its leading position in redevelopment projects in south-central Mumbai and continued consumer demand for real estate projects. The brokerage’s target price is 1,134 per share, indicating an 88% upside potential from the stock’s latest trading price.

Nuvama estimates 51% CAGR in pre-sales in FY24-27, with estimated pre-sales 1,663 crores. The brokerage expects gross and net cash flows to be generated from the company’s existing project pipeline and inventory 7,117 crore more 3,771 crore respectively in FY25-32.

Additionally, Nuvama anticipates that the addition of any new projects will further boost cash flows. It estimates revenue growth pre SalesEBITDA margin is expected to stabilize at 52-53%.

It also projects EBITDA to reach 50.4% CAGR by FY24-27 791 crore, and 101.9% PAT CAGR in the same period Rs 555 crore due to decline in interest cost.

Good performance in Q2

Suraj Estate reports stable execution in Q2FY25, revenue grows 5% YoY 109 crores. However, EBITDA margin declined 287 basis points year-on-year to 58.2%, impacted by higher construction costs (19%) and increase in employee expenses (82%).

PAT increased by 88% YoY Rs 32 crore due to lower interest cost. Sequentially, revenues declined 18% on a high base, but EBITDA remained stable, and PAT grew 6%.

Bookings increased by 26% year-on-year Rs 107 crore, despite a seasonally weak second quarter, volumes grew 14% YoY to 22,201 sq ft. Average realization improved 10% year over year due to steady uniform pricing growth. Sequentially, pre-sales witnessed a 24% decline due to a 19% decline in volumes from a higher base.

As of the end of September, the company had approximately 71,000 square feet of inventory. (GDV: 395 crore) in ongoing projects and plans to launch around 9 lakh sq. ft. (GDV: 5,000 crore by FY27).

For FY25, the launch price is around Rs 1,150 crore (Residential/Commercial: 675 crore/ An expected pre-sale of Rs. 475 crore) has been planned Rs 850 crore (Residential/Commercial: 650 crore/ 200 crore), according to Nuwama.

Disclaimer, The views and recommendations expressed in this article are those of the individual analysts. These do not represent the views of the Mint. We advise investors to check with certified experts before taking any investment decision.