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On a strong footing

MLIFE clocked Q2FY23 sales bookings worth Rs4.0bn (I-sec estimate of Rs3.8bn) led by Nestalgia, Pune launch. MLIFE has already clocked H1FY23 sales bookings of Rs10.0bn which is equivalent to entire FY22 sales and for H2FY23, the company plans to launch projects with a Gross Development Value (GDV) of Rs10bn and we expect the company to clock FY23E sales bookings of Rs17.6bn. While the two Mumbai launches at Dahisar and Kandivali are now delayed to FY24E, we have already factored this in our estimates. We retain our ADD rating on MLIFE with an unchanged target price of Rs461/share which includes a premium to NAV of 50% considering the company’s strong business development pipeline. Key risks to our rating are demand slowdown in the Indian residential market and rising interest rates in India

* Q2FY23 sales bookings along expected lines: MLIFE clocked Q2FY23 sales volumes of 0.47msf worth Rs4.0bn (I-sec estimate of Rs3.8bn) led mainly by one new launch in Pune (Nestalgia Phase 1) having an estimated GDV of Rs2bn which contributed 35% of the quarter’s sales or Rs1.4bn. In H2FY23, the company plans to launch projects with GDV of Rs10bn across Pimpri, Pune (Nestalgia Phase 2), new Pimpri land (Rs4.5bn) and new phases of Eden (Kanakpura, Bengaluru), Happinest, Kalyan and plots in Chennai. The business development pipeline remains strong with active discussions for a GDV of Rs50bn across new land parcels of which Rs15-20bn is at an advanced stage and is expected to close within FY23 including a society redevelopment project in Mumbai.

* Mumbai launches now delayed to FY24, already incorporated in our estimates: MLIFE had concluded three land deals in FY22 aggregating to a total GDV of Rs38bn of which the Dahisar JDA (GDV of Rs10bn) and Kandivali East outright purchase (GDV of Rs25bn) were the major projects. Further in Q1FY23, the company announced the acquisition of another 11.5acres of land in Pimpri, Pune having 2msf of saleable area with an estimated GDV of Rs17bn. While the company was earlier targeting a H2FY23 launch for Dahisar project, approval delays have pushed the launch possibly to H2FY24 while the final deal conclusion for Kandivali is expected to be completed in Q3FY23 with a launch targeted in Q2/Q3FY24. We have already factored these delays in our estimates and expect MLIFE to clock Rs18bn of sales bookings in FY23E (H1FY23 sales bookings of Rs10bn), Rs21bn in FY24E and Rs26bn in FY25E.

* Thane land parcel may add significant value if approvals come through: MLIFE has an unencumbered land parcel of 68acres along the Ghodbunder Road in Thane, MMR for which it has now received the SEZ de-notification and the company intends to develop a mixed-use project (5msf) and is looking to rope in a partner for the annuity portion. While the company is working towards getting this project ready for launch earliest by Q4FY24, we await further clarity on approvals before incorporating this project in our estimates

* Opportunity to grow further post FY25E remains huge: With MLIFE targeting to generate Rs25bn of sales value annually by FY25E at an EBITDA margin in excess of 20%, we believe that this business can potentially generate over Rs5bn of annual operating surplus cash flow (OCF surplus) in 3-4 years’ time. Assigning an 8-10x OCF multiple, MLIFE’s residential business could be worth between Rs40-50bn in the medium term. Beyond FY25E, the company has huge scope to grow.

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