The brokerage sees a “moderating growth outlook” for Godrej Properties and “weaker-than-expected growth” at Phoenix Mills, while highlighting that both companies are trading at stretched valuations relative to sector benchmarks.
Godrej Properties: Pre-sales cooling, volume strategy under strain
Nomura’s initiation on Godrej Properties (GPL) comes with a target price of Rs 1,900, implying a 17.7% downside from its July 8 close of Rs 2,310. “Initiate at Reduce on moderating growth outlook,” the brokerage said, citing a deceleration in pre-sales momentum and limited visibility on future project pipeline.
“Expect pre-sales momentum to be weaker than expectations; valuation looks stretched,” Nomura said, estimating FY26 presales at Rs 310 billion, roughly 5% below the company’s own guidance of Rs 325 billion. Despite delivering a 35% CAGR in pre-sales between FY19 and FY25, the brokerage expects growth to taper off on a high base.
“We believe Godrej Properties is unlikely to exceed the FY26 new launch guidance of +INR400bn by a wide margin given new BD over the past two years has not been that exciting,” Nomura noted. It also expects sales from new launches to moderate to about 55% of new launch value, down from over 60% in FY24 and FY25.The brokerage flagged the company’s reliance on a volume-led expansion strategy as a structural vulnerability. “Between FY10 and FY25, the company’s shares in circulation rose from 150mn to 301mn, implying an equity dilution of +100%,” it said, warning that persistent free cash flow deficits of over Rs 10 billion annually raise the likelihood of further dilution.Valuation premiums, too, came under scrutiny. GPL is currently trading at a 135% premium to NAV, significantly above peers such as Macrotech and Prestige. Nomura values the stock at a more conservative 95% premium to NAV under a sum-of-the-parts (SOTP) methodology, which includes residential operations, the Trees Hotel asset, and the development management contract for the Vikhroli land parcel.
The brokerage pointed to “weaker-than-expected performance of some key projects” as a downside catalyst. Potential upside risks include “stronger-than-expected sales from new launches” and “stronger-than-expected new launches/new BD.”
Phoenix Mills: Mature mall fatigue, margin compression ahead
For Phoenix Mills, Nomura set a target price of Rs 1,400, implying an 11.1% downside from Tuesday’s close of Rs 1,575. “Initiate at Reduce on weaker-than-expected growth,” the brokerage said, projecting a notable slowdown in retail consumption growth and pressure on margins.
Nomura expects retail consumption to grow at a 9% CAGR over FY25–27, down sharply from the 40% CAGR seen over FY22–25. This is primarily due to softening demand at mature malls, including Phoenix Palladium and the Market City and United mall chains, which together account for 65% of total consumption.
“We expect an overall retail consumption CAGR of ~9% over FY25–FY27F,” Nomura said, noting that contribution from newer malls, including those in Surat and Kolkata, will likely materialise only after FY29.
Margins are also expected to come under strain. “Retail EBITDA margin declined from 75% in FY23 to 71% in FY25,” Nomura noted, with tenant churn and a growing share of Tier-2 city malls, such as those in Indore and Ahmedabad, weighing on profitability. These assets reported EBITDA margins of 55–60% in FY25, versus 70–84% for Tier-1 locations.
At 24x FY26 EV/EBITDA, Nomura views Phoenix Mills’ valuation as rich. Its EBITDA forecasts for FY26 and FY27 are 9% and 12% below Bloomberg consensus, respectively. The brokerage expects consolidated EBITDA to grow at a 14% CAGR through FY30, a significant slowdown from the 43% CAGR recorded between FY22 and FY25.
Nomura values Phoenix Mills’ retail segment at Rs 442 billion, commercial at Rs 42 billion, and hotel business at Rs 42 billion, with the residential segment valued at Rs 8 billion on a NAV basis.
The brokerage cited “1QFY26F EBITDA missing consensus by 7%” as a potential downside catalyst, while the only identified upside risk is “stronger-than-expected consumption in mature malls.”
Valuation realism over growth optimism
Nomura’s bearish initiation on both stocks points to a broader call for realism in assessing India’s real estate sector. While both developers have demonstrated strong execution and brand strength, the brokerage believes investor expectations have run ahead of fundamentals.
With growth moderating off a high base and capital efficiency coming under pressure, Nomura’s message is clear: valuation premiums need to reflect ground realities, not past momentum.
Also read | How Godrej Properties, DLF and other real estate majors sold homes worth Rs 1.62 lakh crore in FY25(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
