The brokerage sees a “moderating progress outlook” for Godrej Properties and “weaker-than-expected progress” at Phoenix Mills, whereas highlighting that each corporations are buying and selling at stretched valuations relative to sector benchmarks.
Godrej Properties: Pre-sales cooling, quantity technique beneath pressure
Nomura’s initiation on Godrej Properties (GPL) comes with a goal worth of Rs 1,900, implying a 17.7% draw back from its July 8 shut of Rs 2,310. “Provoke at Cut back on moderating progress outlook,” the brokerage stated, citing a deceleration in pre-sales momentum and restricted visibility on future mission pipeline.
“Count on pre-sales momentum to be weaker than expectations; valuation appears to be like stretched,” Nomura stated, estimating FY26 presales at Rs 310 billion, roughly 5% under the corporate’s personal steering of Rs 325 billion. Regardless of delivering a 35% CAGR in pre-sales between FY19 and FY25, the brokerage expects progress to taper off on a excessive base.
“We imagine Godrej Properties is unlikely to exceed the FY26 new launch steering of +INR400bn by a large margin given new BD over the previous two years has not been that thrilling,” Nomura famous. It additionally expects gross sales from new launches to average to about 55% of latest launch worth, down from over 60% in FY24 and FY25.The brokerage flagged the corporate’s reliance on a volume-led growth technique as a structural vulnerability. “Between FY10 and FY25, the corporate’s shares in circulation rose from 150mn to 301mn, implying an fairness dilution of +100%,” it stated, warning that persistent free money stream deficits of over Rs 10 billion yearly increase the chance of additional dilution.Valuation premiums, too, got here beneath scrutiny. GPL is at present buying and selling at a 135% premium to NAV, considerably above friends akin to Macrotech and Status. Nomura values the inventory at a extra conservative 95% premium to NAV beneath a sum-of-the-parts (SOTP) methodology, which incorporates residential operations, the Bushes Lodge asset, and the event administration contract for the Vikhroli land parcel.
The brokerage pointed to “weaker-than-expected efficiency of some key initiatives” as a draw back catalyst. Potential upside dangers embrace “stronger-than-expected gross sales from new launches” and “stronger-than-expected new launches/new BD.”
Phoenix Mills: Mature mall fatigue, margin compression forward
For Phoenix Mills, Nomura set a goal worth of Rs 1,400, implying an 11.1% draw back from Tuesday’s shut of Rs 1,575. “Provoke at Cut back on weaker-than-expected progress,” the brokerage stated, projecting a notable slowdown in retail consumption progress and strain on margins.
Nomura expects retail consumption to develop at a 9% CAGR over FY25–27, down sharply from the 40% CAGR seen over FY22–25. That is primarily on account of softening demand at mature malls, together with Phoenix Palladium and the Market Metropolis and United mall chains, which collectively account for 65% of complete consumption.
“We anticipate an general retail consumption CAGR of ~9% over FY25–FY27F,” Nomura stated, noting that contribution from newer malls, together with these in Surat and Kolkata, will probably materialise solely after FY29.
Margins are additionally anticipated to come back beneath pressure. “Retail EBITDA margin declined from 75% in FY23 to 71% in FY25,” Nomura famous, with tenant churn and a rising share of Tier-2 metropolis malls, akin to these in Indore and Ahmedabad, weighing on profitability. These belongings reported EBITDA margins of 55–60% in FY25, versus 70–84% for Tier-1 areas.
At 24x FY26 EV/EBITDA, Nomura views Phoenix Mills’ valuation as wealthy. Its EBITDA forecasts for FY26 and FY27 are 9% and 12% under Bloomberg consensus, respectively. The brokerage expects consolidated EBITDA to develop at a 14% CAGR by FY30, a major slowdown from the 43% CAGR recorded between FY22 and FY25.
Nomura values Phoenix Mills’ retail section at Rs 442 billion, business at Rs 42 billion, and resort enterprise at Rs 42 billion, with the residential section valued at Rs 8 billion on a NAV foundation.
The brokerage cited “1QFY26F EBITDA lacking consensus by 7%” as a possible draw back catalyst, whereas the one recognized upside threat is “stronger-than-expected consumption in mature malls.”
Valuation realism over progress optimism
Nomura’s bearish initiation on each shares factors to a broader name for realism in assessing India’s actual property sector. Whereas each builders have demonstrated robust execution and model energy, the brokerage believes investor expectations have run forward of fundamentals.
With progress moderating off a excessive base and capital effectivity coming beneath strain, Nomura’s message is obvious: valuation premiums must mirror floor realities, not previous momentum.
Additionally learn | How Godrej Properties, DLF and different actual property majors offered properties value Rs 1.62 lakh crore in FY25
(Disclaimer: Suggestions, recommendations, views and opinions given by the consultants are their very own. These don’t symbolize the views of the Financial Instances)
