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Growth story on track

MLIFE’s Q2FY22 residential sales bookings of Rs3.0bn (Isec estimate of Rs2.8bn) were up 100% QoQ driven by strong demand in existing projects and Chennai Happinest launch. Further, with the company guiding for four to five new launches in H2FY22 having potential sale value of over Rs10bn, we expect trajectory of sales to meaningfully improve from Q3FY22. The company has also announced its first land bank accretion in FY22 in Mumbai’s western suburbs having a GDV of Rs10bn and expects to close another three to four new land parcels having cumulative GDV of Rs30bn over the next two to three quarters. We reiterate our BUY rating on MLIFE with a revised Mar’22 DCF based target price of Rs339/share (earlier Rs313) valuing the company at a 40% premium to NAV of Rs242/share. Key risks to our rating are a demand slowdown in the Indian residential market and rising interest rates in India.

* Strong recovery in sales bookings, land bank accretion a key positive: MLIFE reported Q2FY22 residential sales of 3.0bn (Isec estimate of Rs2.8bn) vs. Rs1.5bn clocked in Q1FY22 with existing inventory and new Chennai Happinest launch seeing decent offtake. With another 4-5 launches having total booking value of over Rs10bn set to be launched in the remainder of FY22E, we expect trajectory of sales to meaningfully improve from Q3FY22. Another key positive was the company announcing a Joint Development Agreement (JDA) for 0.5msf of carpet area in Dahisar, located in Mumbai’s western suburbs having a Gross Development Value (GDV) of Rs10bn. This is the company’s first major land bank accretion announced in FY22 and as per the company management, it is targeting addition of three to four new land parcels over the next twothree quarters having cumulative GDV of ~Rs30bn. This is in line with the company’s stated intent to annually incur land spend of Rs5bn which can generate annual GDV of Rs20-25bn with major focus being on the markets of MMR and Pune.

* Annual sales expected to grow 3-4x by FY25E: We expect MLIFE to clock Rs12.3bn of sales bookings in FY22E and expect annual sales to touch Rs25bn by FY25E implying a sales value CAGR of 39% over FY21-25E. Given the company’s strong corporate brand and presence in five of the major Tier 1 residential markets in India which account for over 80% of India’s residential sales value, we believe this is easily achievable assuming that the new land bank additions come through.

* 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 where current residential prices hover between Rs7,000-8,000/psf and this project, if launched, can potentially have saleable area of ~10msf. While the company is working towards getting this land parcel ready for launch sometime towards the end of FY23E, we await approvals for the project coming through before incorporating this 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 considering that it may have just over 1% residential market share in Tier 1 cities by FY25E.

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