Prestige Estates target raised by CLSA, holds Buy rating By Investing.com

On Saturday, CLSA maintained its Buy rating on Prestige Estates Projects Ltd (PEPL:IN) and increased the price target to INR 2,320 from INR 1,875. Prestige Estates, recognized as one of the top two developers in presales for the past three years, continues to trade at a significant discount to its peers despite its year-to-date outperformance.

The analyst noted that investor concerns have centered around Prestige’s lower project pipeline compared to its competitors, which could affect presales growth visibility, and an anticipated rise in leverage due to substantial capital expenditures and spending on new land acquisitions. Despite these concerns, Prestige Estates is ambitiously aiming to boost its rental income fivefold over the coming four years and is targeting a presales growth of 25-30% per annum.

CLSA believes that Prestige’s operating cash flow will be adequate to support its planned capital expenditures and the growth of its project pipeline. While acknowledging that debt levels are expected to rise, the firm anticipates that the interest cover ratio will remain comfortable at over four times. This financial cushion is seen as a counter to investor concerns regarding the company’s leverage.

The firm’s confidence in the developer’s financial strategy and growth prospects has led to an upward revision in earnings estimates, which in turn has justified the higher price target. CLSA expects that the company’s strategic scaling up and solid cash flow management will continue to drive a positive re-rating in the market.

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