Buy Mahindra Lifespace Developers Ltd For Target Rs.335 - ICICI Direct
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Walking the talk on new land addition…
About the stock: Mahindra Lifespace Developers (MLD) is the real estate and infrastructure development business of the Mahindra Group. It has 27.4 msf of completed, ongoing and forthcoming residential projects across seven cities and over 5,000 acres of ongoing and forthcoming projects under development at its integrated developments / industrial clusters across four locations. The company has outlined five year plans wherein it aims to achieve the sales value of | 2500 crore by FY25. For the same, it is targeting four land transactions every year totalling ~| 2,000 crore worth of sales potential
Q2FY22 Results: MLD reported healthy Q2FY22 results.
* Residential sales volume, value was up by 1.4x, 2.7x YoY at 0.39 msf and | 303 crore, respectively. Collections at |171 crore was up ~28% YoY
* On financial front, revenues were up 92.5% YoY at | 59.2 crore on a depressed base. PAT | 6.5 crore, was driven by superior profitability in industrial cluster segment (part of profit from associates/JV) wherein profit was | 33 crore, while residential segment had reported loss of | 26 crore
What should investors do? MLD share price has grown at ~16% CAGR over past five years (from ~| 133 in October 2016 to ~| 278 levels in October 2021).
* We maintain our BUY rating on the company
Target Price and Valuation: We value MLD at | 335/share.
Key triggers for future price performance:
* Robust launch pipeline and unsold inventory with | 2,308 crore of potential cash flow
* Huge captive land bank and expansion plans to spend | 500 crore each year on land having potential to generate annual sales of ~| 2,000 crore
* Recent management changes lend diverse expertise and scale IC & IC business to benefit from PLI/manufacturing push
* Borrowing cost lowest amongst the peers– a huge competitive advantage
Alternate Stock Idea: Besides MLD, we like Nesco Ltd in real estate space.
* Play on recovery of exhibition and office leasing
* BUY with a target price of | 745
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