Multibagger stock Suraj Estate tumbles 29% from recent peak. Is it a good chance to buy?

Multibagger Stock: Shares of Suraj Estate Developers, a real estate construction company, have come under significant selling pressure, with the stock declining by 29% to ₹603 apiece in less than three months. This correction follows a sharp, one-way surge in the stock price between March and August 2024, which led to a massive gain of 222%.

Despite the recent pullback, analysts remain optimistic about Suraj Estate’s prospects, particularly following its strong Q2FY25 performance. Most analysts have maintained a positive outlook on the company, with some even raising their target prices, indicating that the stock could rebound in the near term.

Domestic brokerage firm Nuvama Professional Clients Group has lifted its target price higher for the stock to ₹992 per share from ₹935 while keeping its ‘buy’ rating intact.

The brokerage’s optimistic outlook is based on the company’s robust project lineup and healthy launch pipeline, its leadership position in the redevelopment segment in South-Central Mumbai, strong cost advantages, and a proven track record in redeveloping 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 leadership position in redevelopment projects in South-Central Mumbai and continued consumer demand for real estate projects. The brokerage has a target price of ₹1,134 per share, implying an 88% upside potential from the stock’s latest trading price. 

Nuvama projects a 51% CAGR in pre-sales over FY24–27, with estimated pre-sales of ₹1,663 crore. The brokerage expects the company’s current project pipeline and inventory to generate gross and net cash flows of ₹7,117 crore and ₹3,771 crore, respectively, over FY25–32.

Additionally, Nuvama anticipates that any new project additions will further boost cash flows. It forecasts revenue growth in line with pre-sales, with EBITDA margin expected to stabilise at 52-53%.

It also anticipates a 50.4% EBITDA CAGR over FY24–27, reaching ₹791 crore, and a 101.9% PAT CAGR over the same period to ₹555 crore, driven by falling interest costs.

Healthy performance in Q2

Suraj Estate reported steady execution in Q2FY25, with revenue growing 5% YoY to ₹109 crore. However, EBITDA margin fell by 287 basis points YoY to 58.2%, impacted by higher construction costs (19%) and increased employee expenses (82%).

PAT grew 88% YoY to ₹32 crore, driven by lower interest costs. Sequentially, revenue declined 18% on a high base, but EBITDA remained stable, and PAT grew 6%.

Bookings increased by 26% YoY to ₹107 crore, with volume growing 14% YoY to 22,201 sq. ft., despite the seasonally weak second quarter. The average realisation improved by 10% YoY, thanks to steady like-for-like pricing growth. Sequentially, pre-sales saw a decline of 24%, driven by a 19% drop in volume from a high base.

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

For FY25, launches worth approximately ₹1,150 crore (residential/commercial: ₹675 crore/ ₹475 crore) are planned, with expected pre-sales of ₹850 crore (residential/commercial: ₹650 crore/ ₹200 crore), according to Nuvama.

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