Buy Mahindra Lifespace Developers Ltd For Target Rs.940 - ICICI Direct
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Play on expanding residential portfolio…
About the stock: Mahindra Lifespace Developers (MLD) is the real estate and infrastructure development business of the Mahindra Group. It has 27.4 million square feet (msf) of completed, ongoing and forthcoming residential projects across seven cities and over 5,000 acres of ongoing, forthcoming projects under development at its integrated development/industrial clusters across four locations.
* The company has outlined five years plans wherein it aims to achieve 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
Q1FY22 Results: MLD reported muted Q1FY22 results.
* Sales volume, value was up 1.25x, 2.7x YoY on depressed base at 0.18 msf, | 145 crore, respectively. QoQ, sales value declined 58%, with second wave impact & no new launches. Collections at | 204 crore were up 1.8x YoY
* On the financial front, revenues were up 9.2x YoY at | 148.2 crore on superior recognition in residential segment. Losses were at | 13.9 crore
What should investors do?
MLD’s share price has grown at ~13% CAGR overthe past five years (from ~| 415 in July 2016 to ~| 754 levels in July 2021).
* We maintain our BUY rating on the company
Target Price and Valuation: We value MLD at | 940/share.
Key triggers for future price performance:
* Robust launch pipeline and unsold inventory with | 2,593 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 among peers– a huge competitive advantage
Alternate Stock Idea: Apart from MLD, we like Nirlon in the real estate space.
* Quality Grade-A office assets and backing of Reco Berry – an affiliate of GIC
* BUY with a target price of | 400
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