Real Estate Stocks to Watch: Emkay's Top Picks for Up to 45% Upside

Brokerage firm Emkay Global has begun coverage on India's real estate sector, taking a broadly positive view on the market. The brokerage has issued a 'Buy' rating on Lodha Developers, Sunteck Realty, and Arvind Smartspaces, while assigning an 'Add' rating to DLF and a 'Reduce' recommendation for Oberoi Realty.

Emkay has set a price target of ₹1,500 for Lodha Developers, indicating a 33% upside. For DLF, the target stands at ₹810, implying a 14% upside. For Oberoi Realty, the brokerage has a target of ₹1,650, estimating a modest 2% upside. Sunteck Realty has been assigned a target of ₹610 with a potential 45% upside, and Arvind Smartspaces carries a target of ₹850, pointing to a 39% upside.

According to Emkay, the market share of listed real estate players doubled to 15% between FY11 and FY25, and the firm remains constructive on the continuity of housing demand. The brokerage prefers prudent small and mid-sized companies (SMID) players, which it believes can deliver 25 to 35% pre-sales CAGR over FY25-28 thanks to a favorable base and continued market share gains. Among the larger companies, it highlighted Lodha for its stronger growth visibility and diversification.

Emkay notes that its coverage universe shows healthy cash generation, with net operating cash flow at 30 to 60% of collections. The firm adds that business development has been strong over the past three to four years, while the industry's net debt has fallen 65% since FY17, leaving developers well positioned for the next phase of growth and better equipped to handle potential shocks.

The brokerage finds prudent SMID players such as Arvind Smartspaces and Sunteck attractive as they trade at a 10 to 20% discount to NAV, while Lodha also remains appealing at current levels. Emkay sees Arvind Smartspaces and Sunteck as its preferred SMID picks due to their strong growth visibility, and considers Lodha its top large-cap choice given its launch pipeline, diversification, and ongoing business development. The target price for Lodha implies a 45% NAV premium, lower than levels seen in the past one to two years.

Emkay values DLF at its NAV as it expects muted growth and limited diversification, while it believes Oberoi, already trading at premium valuations, is fairly priced at a 50% NAV premium.