Motilal Oswal sees 52% bull-case upside in newly listed realty stock

Brokerage firm Motilal Oswal has initiated coverage on Sri Lotus Developers and Realty Ltd. on Wednesday, September 24, with a 'Buy' recommendation and a price target of ₹250 per share.

Motilal Oswal's price target implies a potential upside of 35% from Tuesday's closing levels.

The brokerage wrote in its note that Sri Lotus Developers and Realty has established itself as a key player in the society redevelopment space.

The company's pre-sales grew at a CAGR of 39% over financial year 2022-2025 and are expected to accelerate at a 129% CAGR over over financial year 2025-2028, supported by a strong project pipeline.

Currently, Lotus Developers has four completed and five ongoing residential projects with a combined potential value of ₹1,900-2,000 crore.

It also has eight upcoming residential projects with a GDV of ₹7,000-7,500 crore and three commercial assets under development, with an estimated sales potential of 0.2 msf, translating to ₹3,000-3,500 crore.

The company is executing 2.6 msf of projects, with nearly 89% under the redevelopment model. Collections are expected to grow at a 129% CAGR, reaching ₹4,020 crore by FY28E, while cumulative operating cash flows (OCF) could touch ₹6,900 crore by FY32.

Backed by best-in-class execution, Lotus Developers is expected to deliver operating margins above 40% and net profit margins exceeding 35%.

Motilal Oswal further said that the company's zero-debt, litigation-free status enhances its ability to acquire projects, supported by RoE/RoCE above 26% and a strong net cash position.

In its bull-case scenario, the brokerage has a price target of ₹282, implying a 52% upside. This assumes a faster bookings CAGR of 144% over FY25-28 (as against 129% in the base case), driving collections growth of 143% CAGR and cumulative OCF of ₹160 crore (as against ₹130 crore in the base case).

Shares of Sri Lotus Developers and Realty ended 0.69% lower on Tuesday at ₹187.