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Macrotech Developers (LODHA) achieved its best-ever annual sales bookings in FY23 worth Rs120.6bn (up 34% YoY) and higher than its guidance of Rs115.0bn at the beginning of FY23. Further, the company’s India business net debt reduced by
Rs22.3bn YoY in FY23 to Rs70.7bn as of Mar’23. FY23 was also strong year for business development with the company adding GDV of Rs198bn across 12 new projects vs. its FY23 guidance of Rs150bn of GDV addition. For FY24, the company is
targeting 20% YoY growth in sales bookings to Rs145.0bn (I-sec estimate of Rs134.0bn) driven by new Mumbai/Pune launches and two Bengaluru project launches and expects to generate an operating surplus of Rs60bn pre-interest.
Beyond FY24, the company is targeting a further 20% CAGR between FY24-26E which implies FY26E sales bookings of Rs210bn which is contingent on new project additions and the residential cycle remaining favourable over the long term. We retain
our BUY rating with a revised target price of Rs1,262/share (earlier Rs1,275) based on FY23 NAV owing to balance sheet adjustments. Key risks are demand slowdown in the MMR market and rising interest rates.

* Strong quarter for sales bookings: LODHA clocked Q4FY23 India business sales bookings worth Rs30.3bn (decline of 12% YoY) and was in line with I-sec estimate of Rs30.0bn. For FY23 overall, the company achieved its best-ever annual sales bookings worth Rs120.6bn (up 34% YoY) and higher than its guidance of Rs115.0bn at the beginning of FY23. Further, the company’s India business net debt reduced by Rs22.3bn YoY in FY23 to Rs70.7bn as of Mar’23 as it generated an operating surplus of Rs56.6bn in FY23 against which the company incurred interest costs of Rs10bn and spent Rs24.3bn for business development activities, resulting in a net cash surplus of Rs22.3bn which was utilised to reduce net debt. The company was also able to raise prices by ~8% in FY23 across its projects and is factoring in a further 5-6% price growth in FY24.

* Business development activity remains strong: Post listing in Q1FY22, the company has added new projects having total saleable area of 8.8msf having an estimated Gross Development Value (GDV) of Rs146.0bn in FY22, majority of which were slated for FY23- 24 launch. At the beginning of FY23, the company had given guidance of adding new projects having GDV of Rs115bn in FY23 against which it has already added projects having GDV of Rs198.0bn in FY23 which augurs well for medium-term growth visibility in residential sales bookings. For FY24, the company is targeting new launches across 10.6msf with a GDV of Rs129.4bn.

* Targeting 20% sales booking CAGR over FY23-26: Buoyed by the strong FY23 performance, the company is targeting 20% sales booking growth in FY24E to Rs145.0bn (I-sec estimate of Rs134.0bn) and is targeting to sustain this 20% sales CAGR over FY24-26 as well, implying FY26E sales bookings of Rs210bn. While these numbers are achievable given the expansion in new markets such as Pune and Bengaluru, this would require the company to continuously procure new land parcels in prime locations and would also require residential real estate demand to sustain. We currently model for FY24E and FY25E sales bookings of Rs134.0bn and Rs148.0bn, respectively. We await further clarity on company’s ability to replenish high value inventory, especially in South and Central Mumbai before raising our estimates further.

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