Nuvama's Bullish Stance on Prestige Estates and Brigade Amid Mid-Cycle Trends

Prestige Estates and Brigade Enterprises are emerging as top picks in the real estate sector, according to a recent brokerage report by Nuvama. The report highlights the strengths of these developers despite the industry entering the middle stage of the housing cycle. Nuvama's analysts have reiterated a "BUY" call on both Prestige Estates and Brigade, citing their strong positioning and long-term potential. However, the report also notes some short-term challenges faced by these developers.

Key Takeaways:

• Nuvama's report highlights the improvement in profitability across realty developers, with cash EBITDA margins improving to 42% in FY25.
• The moderation in sales velocity has led to working capital build-up, with 12 developers experiencing a negative working capital cycle in FY24, compared to nine in FY25.
• Developers have been more aggressive with land purchases and expansion, with land capex rising to 34% in FY25.
• Despite higher investments, debt levels have not worsened for several players, with net debt reducing YoY for ten developers.
• Prestige Estates faced a cash deficit due to high annuity capex in FY25, while Brigade was at the lower end of cash EBITDA margins.
• Nuvama remains bullish on these counters due to their ability to capture growth as the cycle plays out.

Statistics:

• Cash EBITDA margins improved to 42% in FY25, compared to 40% in FY24.
• Overall cash operating profits rose nearly 16% year-on-year in FY25.
• The number of developers experiencing a negative working capital cycle dropped from 12 in FY24 to 9 in FY25.
• Land capex rose to 34% in FY25, compared to 31% in FY24.
• Ten developers saw a reduction in YoY net debt in FY25, compared to 8 in FY24.

Sources:

• IE Online Media Services Pvt. Ltd.
• Contify.com