Sunteck Realty Shares Surge 4% as Jefferies Raises Target Price by 33%

On October 11, shares of Sunteck Realty witnessed a 4 percent increase as international brokerage firm Jefferies raised the price target by 33 percent, from Rs 415 to Rs 555. This upward revision follows Sunteck’s recent collaboration with the International Finance Corporation (IFC) to create a platform for affordable and mid-income housing projects in the Mumbai Metropolitan Region (MMR).

At 10:05 am, Sunteck Realty shares were trading at Rs 465.20, up 3 percent from the previous closing price of Rs 450.50. Jefferies’ revised target price indicates a 23 percent potential upside from the closing price on October 10.

According to Jefferies, the partnership between IFC and Sunteck Realty to establish a joint platform with a total investment of up to Rs 750 crore significantly enhances the company’s growth prospects in the medium to long term. The platform aims to facilitate the development of approximately 12,000 housing units across four to six green housing projects in the MMR. IFC is expected to invest up to Rs 330 crore, with the remaining amount to be contributed by Sunteck Realty.

Advantages for Sunteck Realty

Jefferies noted that Sunteck’s collaboration with IFC bolsters the perception of corporate governance for the company. The platform, along with potential benefits from affordable housing policies, enhances growth visibility and land monetization. Sunteck Realty possesses a substantial land bank focused on mid-income and affordable residential projects in the MMR, spanning six locations. These locations enable Sunteck to offer products in the Rs 40 lakh to Rs 2 crore price range, some of which are expected to be targeted through the IFC platform.

With the potential reintroduction of the interest subsidy component of the government’s PM Awas Yojana (Housing for All) scheme, as mentioned in Prime Minister Narendra Modi’s Independence Day speech, Jefferies anticipates an increase in affordability as effective housing costs decrease. This is likely to expand the pool of eligible home loan customers. With approximately 75 percent of Sunteck’s portfolio dedicated to the affordable housing segment, the company’s growth is expected to accelerate.

Sunteck Realty: Base and Bull Case Target Price

Analysts anticipate that Sunteck will benefit from the current upswing in the residential real estate market. They project a pre-sales growth rate of over 20 percent CAGR from FY23 to FY26. Jefferies stated that the housing market, particularly in Mumbai, is expected to be in an upcycle. Based on these assumptions, the NAV-based target price stands at Rs 555 per equity share. Higher-than-expected sales growth, price appreciation, and new project additions could potentially drive the stock to Rs 620.