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Strong quarter; growth visibility improves Robust launch visibility on continued business development

Lodha Developers (LODHA) added one project in Pune during 1QFY27, with 1.9msf of saleable area and an estimated GDV of INR23b. It has INR413b of launched inventory yet to be sold, which is expected to support sustenance sales. Further, the company has ~71msf (own land + JDA) planned for launch beyond the next 12 months, providing comfortable growth visibility for medium-term pre-sales growth. Additionally, LODHA’s land bank of ~600msf in Extended Eastern Suburbs provides multi-year sales visibility in this micro-market.

1Q pre-sales on expected lines; momentum to improve

In 1QFY27, pre-sales grew by 4% YoY to INR46.3b (in line), despite the absence of any significant launches (1H usually comprises 40% of annual pre-sales). In 1Q, it launched one new phase in its MMR project, offering GDV of ~INR3.3b. MMR remained the key growth driver, contributing 88% of quarterly pre-sales, with the Extended Western Suburbs alone accounting for INR19b (land sales were ~INR12b). Around 60% of 1QFY27 pre-sales were from premium and luxury housing. LODHA has a strong pipeline of projects for the remainder of FY27, comprising 21 launches with a GDV potential of INR241b, providing healthy growth visibility. We maintain a 16% CAGR in pre-sales, reaching INR276b during FY26-28E.

Takes a step forward in the emerging DC business segment

The company recorded a land transaction with Digital Edge in 1Q at ~INR425m/acre. At its 660-acre integrated DC park, it has already sold 132 acres as of 1QFY27. It plans to monetize an additional 143 acres over the next three years, which is expected to generate INR90b (at INR600m/acre). This would fund the development of a 1GW power shell data center on 90 acres on a built-to-suit basis, with an annual rental potential of INR20b by FY32, which would enable the monetization of the Palava land as well as generate steady annuity income. LODHA has reiterated its plan of 10x growth in overall annuity income over the next six years

Robust collections; balance sheet further strengthens

Collections increased 46% YoY to INR42.1b, reflecting strong execution and supported by cash inflows from the Palava land monetization. Strong operating cash flows of ~INR18b in 1Q enabled net debt reduction of INR4.5b QoQ to INR49.3b (net debt-to-equity at 0.2x). With a development pipeline of nearly INR2.0t GDV, management expects the DevCo business to become net debt-free in the coming years.

Highest-ever quarterly profitability

Revenue grew 43% YoY to INR50b, driven by the recently concluded land sale transaction at Palava. Consequently, EBITDA increased 95% YoY to INR19.2b, with EBITDA margin expanding 850bp QoQ to 38.5%. PAT doubled YoY to a record INR13.7b on the back of strong revenue growth and EBITDA margin expansion.

Valuation and view

* LODHA has showcased its ability to diversify regionally beyond MMR while scaling up operations, which is expected to expand its addressable opportunity, derisk operational performance, and improve growth visibility over the medium term.

* Despite strong BD worth INR1.4t over the last 4-5 years, the company has continued to add projects while maintaining a healthy pace of inventory monetization.

* Regional diversification and continuity in the BD activity reinforce our confidence that LODHA can deliver higher growth compared to peers of similar scale while maintaining balance sheet strength.

* Hence, given the continued investments toward growth, we assign a 20% premium to the residential NAV, which we believe is justified as our calculations suggest that the segment can command ~40% NAV premium. Further increase in NAV premium would depend on the pace of project additions in the coming quarters.

* Disciplined cash flow generation has ensured leverage remains well under control, further strengthening the balance sheet. Driven by robust pre-sales performance and project execution, we expect collections growth and OCF generation to remain strong over the next 2-3 years. Scaling up of the commercial segment and data center businesses would offer additional growth avenues over the medium term.

* Overall, we have valued Devco at a 20% premium to NAV, whereas the annuity business is on a 7.5% cap rate.

* LODHA is our preferred pick among the larger developers. Despite the stock’s sharp run-up by 35% in the past 3M, we reiterate our BUY recommendation with a revised TP of INR1,430.

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