Signature Global: Up 293% from IPO price in less than a year, brokerages see more upside in the stock – here’s why

Signature Global, a prominent real estate firm, has provided remarkable returns to its investors, with its stock surging 293% in less than a year since its IPO. Despite the impressive rally, analysts see more potential upside in the stock, especially following the company’s robust earnings report for the first quarter of fiscal year 2025.

The company's initial public offering (IPO), held between September 20 and 22, 2023, was priced between ₹366 and ₹385. It included a fresh issue of 1.57 crore shares totaling ₹603 crore and an offer for sale of 33 lakh shares amounting to ₹127 crore. Despite its significant stock price appreciation, brokerages remain optimistic about Signature Global's future performance, citing the company's strong financial results as a key driver.

The stock has also jumped over 65 percent in 2024 YTD. It is currently just 7.5 percent away from its record high of ₹1,569.95, hit on July 9, 2024. Meanwhile, the scrip has rallied 227 percent from its 52-week low of ₹444, hit on September 27, 2023.

In the quarter ending June 2024, Signature Global reported a consolidated net profit of ₹6.76 crore, reversing a net loss of ₹7.22 crore in the same period the previous year. The company's revenue more than doubled, increasing 141.61% year-on-year to ₹400.6 crore, compared to ₹166 crore in the prior year. Furthermore, the company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) improved to ₹2 crore from a loss of ₹10.1 crore in the previous year.

Signature Global has also set an ambitious sales target of ₹10,000 crore for the fiscal year 2025, leveraging its strong first-quarter performance and plans for new project launches in the Delhi-NCR region. The company continues to capitalise on its strengths in affordable and mid-income housing, with plans to expand into the premium segment to sustain its growth momentum.

Brokerage views

MOSL: The brokerage has initiated coverage with a "buy" recommendation and set a target price of ₹2,000, indicating a potential upside of 38%.

According to MOSL, Signature Global India (SIGNATUR) launched its operations in 2014 and quickly established itself as a leading real estate developer in the Delhi-NCR region within a decade. The company initially focused on the affordable and low/mid-income housing sectors, taking advantage of state government housing policies. Through standardised offerings and a rapid turnaround strategy, SIGNATUR has experienced significant growth, achieving a 42% compound annual growth rate (CAGR) in pre-sales between FY21 and FY23. Its ability to adapt to market trends allowed SIGNATUR to enter the premium segment, doubling its pre-sales to ₹7,300 crore in FY24. MOSL notes that the company's strong execution skills have enabled it to effectively utilise capital and prepare for a robust project pipeline of approximately 30 million square feet over the next two years.

As a result, MOSL expects the company's growth momentum to continue, projecting a 35% CAGR in pre-sales from FY24 to FY27E, reaching ₹17,800 crore. Additionally, the management's strategic land acquisition has helped reduce costs and maintain margins above 35%, outperforming its peers.

ICICI Securities: The brokerage has maintained its "buy" recommendation with a target price of ₹1,707, suggesting a potential upside of 17.5%.

According to ICICI Securities, Signature Global achieved a 63% compound annual growth rate (CAGR) in sales bookings over FY21-24, primarily driven by affordable and mid-income housing projects. In Q1FY25, the company recorded sales bookings of ₹31.2 billion, largely due to the successful launch of its Titanium premium housing project in Sector 71, Gurugram, which contributed to approximately 90% of the quarter's sales bookings.

With a strong pipeline of projects having a cumulative gross development value (GDV) exceeding ₹450 billion from FY24-28, ICICI Securities estimates that Signature Global could achieve a 19% sales booking CAGR over FY24-27E, with annual sales bookings between ₹100 and120 billion for FY25-27E and an average realisation of over ₹13,000 per square foot. The key risks include a potential slowdown in the Gurugram market and challenges in replenishing its land bank. Having already achieved about 30% of its FY25 sales booking target of ₹100 billion and with additional launches planned for FY25, including the Sohna low-rise floors and the second phase of Sector 71, the brokerage believes Signature Global is on track to comfortably meet its FY25 guidance.

Kotak Institutional Equities: The brokerage has reaffirmed its "add" rating with a revised target price of ₹1,555, indicating a 7% upside.

Kotak notes that Signature Global has maintained strong operational performance in Q1FY25, building on an outstanding FY2024. The company is well-positioned to meet its FY2025 management targets, which include pre-sales of ₹100 billion (a 37% year-on-year increase), an EBITDA margin of 35%, and significant launches amounting to ₹160 billion (a 280% year-on-year increase), along with collections of ₹60 billion (a 90% year-on-year increase). With Signature Global trading at an attractive valuation of approximately 8x EV/EBITDA, Kotak has retained its "ADD" rating and revised its fair value (FV) to ₹1,555 from ₹1,375. This adjustment reflects the impact of new business developments and a high sales velocity, contributing to improved asset turnover, although Kotak remains attentive to the company’s margin trends.

Signature Global's stellar stock performance and strong financial results reflect the company's strategic initiatives and growth prospects. With ambitious sales targets, a solid project pipeline, and positive brokerage recommendations, Signature Global is well-positioned to capitalise on opportunities in the real estate market. Investors are advised to consider the company's robust fundamentals and growth potential, while remaining mindful of market risks and challenges.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.