Company: Unitech Ltd.
Industry: Real Estate
CMP and PE Ratio: Rs. 37.50 with a PE ratio of 5.91
Industry Outlook:
- Before October 2007, real estate in India was one of the hottest industry with real estate stocks making new highs and sustaining unbelievable valuations. Now almost everyone is bearish on real estate and real estate stocks. In my opinion the industry wll remain affected for maybe a few years, but the industry should make a big reversal sometime in the future. The reason being that there is immense scope for low cost housing and real estate development in tier 2 and 3 cities in India.
Company Analysis:
- During the boom time, Unitech was just one of the real estate companies posting stellar resuts and going for massive expansion plans. This lead to the company over leveraging itself and Unitech is one of the highest leveraged companies in the real estate pack. So right now, with real estate industry slowing down significantly the company is having immense problems servicing its debt.
- From the buy or sell perspective I would personally not take any long term position in real estate stocks for now. There will be trading opportunities and capitalizing on them would make more sense. I can assure readers that real estate industry and real estate stocks are not going up in a hurry. Infact more problems might come up for real estate players in the next 1-2 years. So my view is that any long term position in real estate should be avoided for now.
In accordance with this general view my suggestion would be not to buy Unitech. Of course when markets reach levels like 7000-8000 on the Sensex, then there are trading opportunities even in real estate stocks.
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