SignatureGlobal: Axis Securities sees up to 30% upside in this real estate player

Brokerage firm Axis Securities has initiated coverage SignatureGlobal India Ltd with a 'buy' rating and see the stock to deliver a strong 30 per cent upside potential in the stock citing its focus on key segments, Gurugram’s micro-markets, strong cash flows combined with improving margins, and resilient sales and quick execution.

Signature’s shift from affordable to mid-income and later premium housing drove accelerated demand and resulted in a low inventory overhang for that segment, focusing on homes priced between Rs 2 to Rs 6 crore. This segment currently has limited proven branded players, and over the past decade, Signature has demonstrated its ability to capture this market, said Axis.

"Signature's plan to capitalise on the Gurugram urbanisation wave, which is transitioning from a investor-driven market into an end-user market. Signature has strategically positioned around areas of forthcoming infra and industrial developments. It is leveraging the city's demand for mid-income and premium housing by positioning itself in North India's trade and IT centres, Axis said.

Shares of SignatureGlobal (India) dropped nearly 3 per cent to Rs 1,271.90 on Thursday with its total market capitalization slipping below Rs 18,000 crore mark. The stock had settled at Rs 1,307.70 on Wednesday. The stock is down nearly 23 per cent from its 52-week high at Rs 1,645.85 hit in September 2024.

Axis expects margin improvement in coming quarters as and when the lagging revenue is recognised. The project-level Ebitda for residential projects ranges between 35-40 per cent, while the overall Ebitda remains within 25-30 per cent. The pre-sales is expected to grow at a robust pace of 36 per cent CAGR over FY25E-FY27E, driven by upcoming launches of 25 million sq. ft, it said.

"Signature has transitioned from affordable housing development to the mid-income and premium segments. Of its seven projects under the affordable housing policy, six witnessed oversubscription at launch. Its broad customer base has positioned it as a market leader in this segment. Its upcoming projects are expected to further bolster its presence," said Axis Securities.

Axis Securities has a 'buy' rating on SignatureGlobal with a target price of Rs 1,645 on the stock, signaling it to retest its previous 52-week highs.

The company board of directors are set to meet on Monday, February 10, 2025 to, inter alia, consider and approve the unaudited financial results (both Standalone and Consolidated) of the Company for the quarter and nine months period ended on December 31, 2024, said the company in an exchange filing.

Kotak Institutional Equities is expecting an improvement in revenue recognition to Rs 950 crore for SignatureGlobal in 3QFY25. It also expects healthy pre-sales of Rs 2,200 crore in 3QFY25, aided by sustenance sales from Daxin (Sohna) and Twin Towers (Sector 84, Gurgaon). Kotak has a 'buy' rating on the stock with a target price of Rs 1,570.