Buy Mahindra Lifespace Developers Ltd For Target Rs.475 - ICICI Direct
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Business development to pick up in H2!
About the stock: Mahindra Lifespace Developers (MLDL) is the real estate and infrastructure development business of the Mahindra Group. It has over 32 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 medium term guidance to achieve sales value of | 2500 crore by FY25. For the same, it is targeting land transactions totalling ~| 3,000 crore worth of sales potential in FY23
Q2FY23 Results: MLDL reported healthy Q2FY23 results.
* Residential sales volume, value was up ~21%, ~32% YoY at 0.47 msf, | 399 crore, respectively, led by offtake from existing projects and new launches of ~0.61 million square feet (sq ft) during the quarter across Pune and Chennai. Collections at | 286 crore were up ~67% YoY
* On the financial front, revenues were up 17.8% YoY at | 69.8 crore. The company reported a loss of | 7.7 crore. Segment wise, industrial cluster segment (part of profit from associates/JV) profit was ~| 27 crore while residential segment had reported a loss of ~| 35 crore
What should investors do? MLDL’s share price has grown at ~23% CAGR over past five years (from ~| 144 in November 2017 to ~| 406 levels in November 2022).
* It remains a scalability play on the residential segment. We expect business development (land acquisition) to pick up in H2FY23. We maintain our BUY rating on the company
Target Price and Valuation: We value MLDL at | 475/share
Key triggers for future price performance:
* Robust launch pipeline and unsold inventory with | 3564 crore of potential cash flow coupled with expansion plans to add land every year having potential to generate annual sales of ~| 2,000-2500 crore
* IC& IC business to benefit from PLI/manufacturing push
Alternate Stock Idea: Besides MLDL, we like Brigade in the real estate space.
* Play on robust residential demand and office leasing
* BUY with a target price of | 595
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