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Wednesday, January 16, 2008

HOT STOCK : GODREJ INDUSTRIES

GODREJ INDUSTRIES stands to gain immensely from the recent repeal of Urban Land Ceiling Act of Maharashtra. It holds a large piece of land in Vikhroli, a central suburb of Mumbai which it can now develop. After development, the rental income alone could be over 100 crores annually. According to sources, the company is holding 82.88% stake of Godrej Properties P. Ltd. which is holding 51% of Godrej Realty P. Ltd. and 100% of Godrej Waterside Properties P. Ltd. These companies are developing an IT Park at Kolkatta and a Residential Project at Thane. There is also a buzz in the market that Godrej Poperties will be coming out with a public issue soon. This and the company's foray into real estate in a big way will result in huge value unlocking for Godrej Industries.

At the time of writing this, the stock was trading at the lows of 359.40. It can turn out to be a Multibagger investment for long term investors.

Cheers!

13 comments:

sandy said...

Excellent, Had this on My Radar, Since this is now Backed by you, I just bought some now at 360

Thanks Superstar,

vipin said...

Hi Superstar,

thanks for your wise reply & advice on my all post. your stocks search are great. i m holding godrej ind 60 @ 461 should i average it now

hardikpndy said...

Can you let us know the short and long term targets?

cheers,
Hardik

ajmera said...

Looks good to me too. But do you think it may give us better entry levels during the ongoing correction

Superstar said...

Hi everyone,

Godrej Industries is a definite ACCUMULATE on dips. Here is an article published in the Business Today which will throw some light on the real story building up in Godrej Ind :


Article on Godrej Properties (Recommendation: Buy)


Builder of your fortune (December 2, 2007- Business Today)


Take a train on the Central Railway in Mumbai, and head towards the city's north-eastern suburbs. Once you reach a station called Ghatkopar, step to the door or look out of the window—on both the east and west sides of the
tracks.


The 4-5 km stretch between Ghatkopar and the next station, Vikhroli, houses the factories of the Godrej group, where everything from locks to chemicals to office furniture is made.


Few are willing to hazard an estimate of the amount of land that the Godrejs own in Vikhroli, with guesstimates varying in the range of 2,500 and 8,000 acres.


The Godrejs, for their part, are in no mood to oblige. "At this point, I can only say we have a lot of land. There are political and regulatory issues and only once we sort them out can we say exactly how much land we own in Vikhroli," says Adi Godrej, Chairman of the Rs 7,200-crore Godrej Group.


Ask Jamshyd Godrej, Chairman, Godrej & Boyce, the group's holding company (who's also the cousin of Adi Godrej), whether 7,000 acres is a fair figure, and all he's willing to say is: "It will be around half that
figure."


Even if you assume the figure at the lowest end that's being bandied
about—2,500 acres—at the prevailing rate of Rs 3,500 per sq. ft in Vikhroli, the Godrejs are sitting on property worth close to Rs 40,000 crore.


That would put the group, which is till date best known for its Rs
800-crore consumer goods entity Godrej Consumer Products Ltd (GCPL), in the league of the country's top tier of property developers.


If you assume that the Vikhroli land bank is spread over 8,000 acres, its value would be a mindboggling Rs 1.21 lakh crore.


That will easily make the Godrejs one of the most valuable companies in the real estate sector—the current numero uno is DLF, whose land bank is estimated to be worth Rs 1.2-1.35 lakh crore. Such a land holding will also be adequate to propel the group into the elite group of Indian mega-corps.


The only caveat? Much of that value is still notional, and a long way from being unlocked. Thanks to archaic laws that still prevail, like the Urban Land Ceiling & Regulation Act (ULCRA) and Forest Land Regulations, Godrej is in no hurry to realise the value in Vikhroli. (If he does so, as per ULCRA he will have to part with a portion of his land to the state government).


Pan-India Presence


Still, Godrej isn't waiting for things to happen. Via a company called Godrej Properties Ltd (GPL)— which will soon make a public offer to investors—the group Chairman has slowly but surely flagged off his real estate venture. As of September, GPL had projects—in progress and signed—on
close to 200 acres of land.


Some of them are joint developments, involving other developers, whilst a few are wholly-owned by GPL.


Going by the property prices prevailing in the various locations where these projects are being executed—in areas in Mumbai, Pune, Bangalore, Kolkata and Hyderabad—Godrej's share is estimated to be worth a little
under Rs 4,000 crore (see Grand Designs).


"Over the next five years, GPL will be the biggest revenue earner for the group; it will be bigger than our FMCG and consumer durables business,"says Godrej.


Adds Milind Korde, Managing Director, GPL: "Today, we have a pan-India presence. In the current year itself, we will develop over 4million sq.ft, against the 3.3 million sq. ft that we've built since inception." Korde
is clear about where GPL is positioned today, and where it should be in the years ahead.


"Today, our peers would be HDIL (Housing Development & Infrastructure), Sobha Developers and Parsvnath Developers, but our aim is to be like DLF. We are aspiring to be among the top three real estate developers in the
country," adds the head of GPL.


That won't happen by just building commercial and residential properties (today, the ratio is 2:1, in favour of commercial). GPL will also build special economic zones (SEZs), hotels, IT parks and retail formats (for the group's ventures as well for third-party retailers).


"By December 2007, GPL will have a land bank of 50 million sq. ft," says Godrej. Of the existing 18.1 million sq. ft under development (which is GPL's share, excluding that of its partners), a little over half ( 9.6 million sq. ft) is being built in Pattancheru in Hyderabad as an IT park.

Cheers!

its_me said...

well this would be my first post to u tried on money control but it did not reach several times.... i ve bought jayswal neco on ur call at 42 only 600 shares at this level do u think its woth buyin more wat is the expection . and as godrej is concerned from the report i ve got i agree completely if the land bank is 7000 acres it wld go 10x from here even if its half 1500 is on cards.. ur recomendations are good .. thanks for them.. keep up the good work mate .. ive godrej at 270 and then at 430 i bought definately buyin more at these levels ..

MegaStar said...

Hi Superstar,
I am a daily visitor to your blog in search of hidden gems picked by you. Frankly speaking i made huge profits after i started visiting your blogs. Thanks a lot for your advices and service . lets hope you will continue this in future and help part time investors like me.

I need your suggesstion on some of the holding i have currently.

Please suggest me your targets for exit in these counters or any alternative.

Satyam Computers 250@475/- (huge loss)
Jayswal Neco 1000@34/-.
Jaicorp 50@1185/-
Andhra Petro 500@35/-
HDFCBank 125@1590/-
Cybermate 3000@18/-
Maars Software 3000@8/-
GMRInfra 1000@200

Please sugesst me on the above scripts .. i am particularly looking to wind up satyam computers .

Your Advice makes my decision more wiser.

Thanks
Rama Kanth

Superstar said...

Hi Its me,
The targets given by you on Godrej Ind are achievable.
Congrats on making good profits in Jayaswal Neco. I think it can be bought around 74-75 levels with a stop loss (profit lock in your case) of 70, next target of 100 plus in the medium term.

Hi Rama Kanth,
You are welcome.
Satyam Comp : Wait for Dec qtr results to take your decision.
Jayaswal Neco: Hold with Profit lock at 70. Targets 80 (achieved earlier also) and 100 next.
Jai Corp: Hold with SL of 1000
Andhra Pet : Hold
HDFC Bank: Hold with SL 1500
Cybermate Info: Hold with SL 14
Maars: Told to exit here earlier also. Still a sell.
GMR Infra: Had advised a sell at 250 here, now at 203. Keep a stop loss of 199 and re-enter at lower levels.

Cheers!

Neeraj said...

Hi Superstar, This is my first day at your blog. I found that Godrej Industries has gone down from 500 to 260 and its still trading at PE of 82. Im really confused regarding this high PE. What made the stock to rise to 500 and then fall so badly? Was it the same real-estate story that took it to such a high level? If yes then it may again fall badly. Can you please give us stop loss and medium to long term target for this stock?

Thanks

Superstar said...

Hi Neeraj,

Did you actually take the trouble of reading through this thread?
This stock's price is not based on its PE but on the value of the vast land that it possesses. The price will keep on fluctuating depending upon the real estate prices. As yet a precise figure is also not available on the landbank it possesses so how can I give you any precise targets. The story will play out once the Godrej Properties IPO is out.

Cheers!

Real said...

Hi Superstar,

I have bought 30 Godrej Ind @ 313/- today.

Just wanted to know if you are still positive on this?

Thanx, Mahesh

Superstar said...

Hi Real,
I am positive on Godrej Ind and you can hold it for the next six months to one year to see maximum gains. But one has to keep in mind that the movement of this stock will depend upon the prevailing real estate prices. And the sentiment is currently weak on property prices.

Cheers!

abitofluck said...

Dear Superstar,

With reference to Godrej Ind, even with recent market meltdown, I firmly belive this stock is a great pick, and a screaming buy at cmp. I wanted your expert opinion on following:

Looking at really high Promoter holding, and some relaxation in norms of creeping acquisition, I wanted to know if interest of minority shareholders can be protected ( incase of delisting etc ). Is there any way by which the Management can deprive share-holders of the future potential gains? (as u know, Godrej Ind also had a buy back offer earlier at a cheap price, which luckily did not get good response)

thanks,

Tejas.