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Strong Growth roadmap laid out!

About the stock: Mahindra Lifespace Developers (MLD) is the real estate and infrastructure development business of the Mahindra Group. It has ~34.5 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 cities / industrial clusters (IC& IC) across four locations.

• It has sharply scaled up sales momentum with FY23 sales value at | 1812 crore vs. | 695 crore in FY21. It intends to continue its scalability drive through new business developments ahead and aims ~5x business in 5 years

Key Investment Thesis:

• Lays down 5x growth aspiration over the next 5 years: The new CEO Amit Sinha (erstwhile Mahindra Group strategy President) has outlined ambitious business growth of 5x over the next 5 years from~ | 2268 crore of resi and IC business sales to | 8000-10000 crore by FY28. Of the same, growth will be largely from residential segment. To achieve its growth target, the company is aiming for a project pipeline with revenue potential of | 40,000-50,000 over the next four years, of which ~| 15000-16000 crore have already been signed up including 68 acres of land at Thane (~| 8000 crore), Mahindra land at Kandivali and Citadel at Pune

• Launches in FY24 to keep sales momentum robust: MLD has shown strong traction in sales momentum over the last two years which has sharply increased from | 695 crore of pre sales in FY21 to | 1812 crore in FY23. Going ahead, the company is aiming to launch 8-9 projects with gross development value of | 3500- 4000 crore in FY24. We expect sales value jumping to ~1.5x from FY23 levels at ~| 2800 crore in FY25E, based on the launch pipelines, and new land addition

• IC&IC business to be stable: The company overall has an inventory of ~1400 acres with total sales value of ~| 5000 crore. The management expects to momentum to remain healthy and stable at | 500 crore, with strong pipeline of enquiries backed by a) expansion of PLI scheme, b) the lower tax rates for new manufacturing facilities, and c) the global realignment of manufacturing and supply chains favoring India.

Rating and Target Price

• We like MLD given its strong parentage, management’s focus on expanding its overall scale of operation and a comfortable balance sheet. With strong focus on scalability, MLD is poised for strong growth in medium and long term

• We maintain our BUY rating

• We value MLD at | 650 per share

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