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Informist, Thursday, Feb. 27, 2025

 

By Aman Aryan

 

MUMBAI – Tax benefits and favourable base effect for two of the industry heavyweights painted a deceptively strong picture of the aggregate performance of the six real estate players that are part of the Nifty 200. Overall, these companies surprised analysts with their net profit growth during the December quarter, while missing expectations on revenue. 

 

The six firms posted a 61% on-year rise in aggregate net profit, excluding exceptional items, for the December quarter against the 40% growth estimated by analysts for the sector, but they fell short of the expected revenue growth of 33.6%. These companies reported just over 23% on-year growth in their aggregate revenues for the quarter.

 

Including exceptional items, the aggregate net profit of these six companies grew 55%, the highest growth they have achieved in the December quarter of any financial year since 2017, according to data available with Informist. Excluding exceptional items and deferred tax, the aggregate profit of the top six listed real estate companies grew just over 8% on year, missing the consensus view by a wide margin.

 

 

Four of these six companies beat the net profit estimates for the sector, with Godrej Properties exceeding the estimates by 121 percentage points. The Mumbai-based company's earnings for the December quarter grew on the back of a near three-fold rise in revenue. Only Prestige Estates Projects Ltd. and The Phoenix Mills Ltd. fell short of the sector estimates.

 

The aggregate net profit excluding one-time items for the top six players in the sector was skewed as DLF's profit for the quarter doubled on year. The company, which accounted for 41% of the sector's aggregate profit, booked a one-time tax credit of INR 8.20 billion during the December quarter, which is more than the aggregate profits of three of its peers. A back-of-the-envelope calculation shows that excluding this tax write-back, the aggregate net profit excluding exceptional items for these six companies would be up only 22% on year, missing analysts' estimates.

 

The absence of a one-time loss of INR 1.05 billion which had dented the profit of another heavyweight Macrotech Developers Ltd. for the year-ago quarter, also boosted the sector's aggregate profit growth during the latest quarter. Macrotech Developers' net profit growth for the December quarter came in at 88% on year, whereas excluding the exceptional item its net profit grew over 55% during the December quarter.

 

While the tax credit for DLF and a favourable base for Lodha lifted the aggregate profit, a one-time exceptional loss of INR 3.02 billion for DLF slowed the profit growth to some extent. The aggregate gross profit of the companies grew 19.5% on year during the latest quarter.

 

Prestige Estates and The Phoenix Mills Ltd. were the laggards among these six companies as their net profit excluding exceptional item, or adjusted net profit, dipped 85% and 11% on year, respectively, due to a fall in revenue. A whooping increase of over 121% in its input costs also hurt the profit growth for The Phoenix Mills.

 

 

Overall, the aggregate revenue growth missed the Street's view, but three of the six companies, which together accounted for nearly 61% of the aggregate value, bucked the trend with strong growth during the December quarter. Their revenue surpassed the Street's estimate for revenue growth of 33.6% for the sector. Revenues of Macrotech Developers, Oberoi Realty, and Godrej Properties Ltd. rose 39%, 34%, and 193%, respectively, during the quarter. On other hand, revenue growth was almost flat for DLF while it fell 8% and 1% for Prestige Estates and The Phoenix Mills, respectively.

 

MARGINS AND COSTS

A tale of two halves emerged in the adjusted net profit margin performance for the December quarter--with three companies reporting an on-year expansion in their margins and the other three reporting a contraction. However, the overall adjusted net profit margin for the six companies expanded by 740 basis points on an aggregate basis to 31.6% for the December quarter. While Macrotech Developers delivered a sales driven margin expansion, Oberoi Realty cut its operational expenses by over 65% on year. Oberoi Realty's net profit margin, excluding exceptional items, expanded 964 bps on year.

 

The mean adjusted net profit margin for the six companies was 33.2% for the December quarter. A very low margin of 1.1% of Prestige Estates skewed this number. Excluding the Bangalore-based company, the mean margin came in at 39.7%, mainly due to DLF's 89% net profit margin, excluding exceptional items, during the December quarter. Prestige Estates has the lowest adjusted net profit margin among these peers. DLF and Oberoi Realty, on other hand, led with 89% and 43.8% margin, respectively.   

 

The overall input costs, including operational expenses and construction material expenses, for the six companies rose only near 4% on year for the December quarter. A fall in Prestige Estates and Oberoi Realty's input costs for the quarter partially offset the higher spends from Godrej Properties and Macrotech Developers. On other hand, the aggregate inventory related gains slightly narrowed by INR 5.28 billion during the December quarter thus it managed to reduce the sector's aggregate expenses by 36%, lower than 43% in the year-ago quarter.

 

Financial costs, which made up nearly 10% of the total expense for the quarter, rose 16% on year for the top six listed real estate firms. The total debt of these companies also saw an on-year uptick of nearly 8% as of Sept. 30. Only Godrej Properties and The Phoenix Mills managed to cut their cost of finance, but only by over 1% on year each. However, as of Sept. 30, their debt was up 32% and 3% on year, respectively. The other four companies recorded a double-digit growth in their finance costs, with Oberoi Realty booking a 49% on year rise, despite it cutting its debt by 38% on year, the highest among its peers.

 

SEQUENTIAL PERFORMANCE

The six real estate companies in the NSE 200 index failed to reap the benefits from the monsoon being over and most of the inauspicious 'shraddh' period getting over in the September quarter. Although five out of six companies posted an over 72% sequential rise in aggregate pre-sales on a cumulative basis, this was mainly driven by a sharp sequential growth in DLF's booking value for the December quarter. Excluding DLF, the aggregate pre-sales fell marginally during the quarter under review. Pre-sales figures of The Phoenix Mills were not available.

 

 

 

These six companies posted a lukewarm sequential performance as the aggregate revenue grew just 4%, whereas the cumulative net profit rose nearly 7% from the previous quarter. Three of the six real estate companies in the 200-stock index reported a sequential dip in their profit and revenue for the December quarter. However, the aggregate net profit, including exceptional items, fell 2% over the previous quarter.

 

 

The following table shows the performance of the six companies in the real estate sector along with the consensus estimate for each company as well as against the consensus estimate for the sector and the Nifty 200 index. 

 

			Nifty 200 Oct-Dec PAT growth 8.8%	Nifty 200 Oct-Dec PAT growth consensus estimate 10%				Nifty 200 Oct-Dec revenue growth 5.5%	Nifty 200 Oct-Dec revenue growth consenus estimate 4%
Company	PAT beat analysts' estimate	Adjusted PAT growth %	Adjusted PAT growth estimate %	PAT beat sector estimate	PAT beat Nifty 200 estimate		Revenue beat analysts' estimate	Revenue growth %	Revenue	Revenue beat sector estimate	Revenue beat Nifty 200 estimate
									growth
									estimate %
DLF Ltd.	YES	107.30	22.78	YES	YES		NO	0.49	17.40	NO	NO
Godrej Properties Ltd.	NO	161.19	410.20	YES	YES		NO	193.21	215.70	YES	YES
Macrotech Developers Ltd.	YES	55.28	0.15	YES	YES		YES	39.32	22.65	YES	YES
Oberoi Realty Ltd.	NO	71.70	84.37	YES	YES		NO	33.92	42.23	YES	YES
Prestige Estates Projects Ltd.	NO	(-)84.78	92.95	NO	NO		NO	(-)7.87	40.36	NO	NO
The Phoenix Mills Ltd.	NO	(-)10.95	5.03	NO	NO		NO	(-)1.11	8.49	NO	NO

 

The following table shows the net profit margins of the six real estate companies that are a part of the Nifty 200 index:

	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Real estate sector	28.87%	22.95%	30.66%
Nifty 200	11.87%	11.51%	11.37%
Company	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
DLF Ltd.	69.26%	43.16%	69.93%
Godrej Properties Ltd.	16.79%	18.84%	30.66%
Macrotech Developers Ltd.	23.13%	17.17%	16.11%
Oberoi Realty Ltd.	43.82%	34.18%	44.66%
Prestige Estates Projects Ltd.	1.07%	6.48%	8.34%
The Phoenix Mills Ltd.	27.15%	28.33%	23.76%

 

End

 

Edited by Akul Nishant Akhoury

 

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