Buy Macrotech Developers Ltd For Target Rs. 1,480 By JM Financial Services
Super market strategy at play; Target 20% growth in FY26E
Macrotech Developers (Macrotech) reported an inline quarter with pre-sales of INR 48.1bn (+14% YoY, +7% QoQ) taking the annual bookings to INR 176.3bn (up 21% YoY), marginally surpassing its FY25 guidance. Growth was led by Western suburbs and Pune where pre-sales increased by 133% and 40% to INR 24.5bn and INR 25.2bn respectively. In FY25, collections and OCF (post interest) came in at INR 143.4bn and INR 60.0bn up 27%/21% YoY. Despite higher spending on land investments, approvals and annuity assets (INR 69.1bn), net debt remained comfortable at INR 40bn with net debt-to-equity of 0.2x. Inline with its historical performance, company has maintained its 20% growth guidance and is targeting to achieve bookings of INR 210bn in FY26E aided by INR 188bn worth of new launches and INR 330bn of inventory. With a target of INR 250bn in new project additions, the company anticipates sustained business development momentum. We remain positive on Lodha as it continues to execute well across all parameters and maintain BUY with a TP of INR 1,480
* Strong performance led by new markets: Macrotech reported its highest ever quarterly pre-sales of INR 48.1bn (+14% YoY, +7% QoQ), which was slightly ahead of our estimates of INR 47bn. For the full year, it achieved a pre-sales of INR 176.3bn (up 21% YoY), marginally surpassing its FY25 guidance. While South and Central region remained largest market for Macrotech with bookings of INR 52.7bn, the growth was led by Western suburbs and Pune where pre-sales increased by 133% and 40% to INR 24.5bn and INR 25.2bn respectively. This was achieved by having a deeper presence (projects in every 2-5kms radius) in its focused markets which is in-line with its successful super market strategy.
* Healthy cash flows: Collections were healthy at INR 44.4bn for 4QFY25, (+26% YoY, +3% QoQ) but the OCF growth was restricted to 11% YoY to INR 23bn due to increased outflow towards construction. In FY25, collections and OCF (post interest) came in at INR 143.4bn and INR 60.0bn up 27%/21% YoY. Despite higher spending on land investments, approvals and annuity assets (INR 69.1bn), net debt remained comfortable at INR 40bn with net debt-to-equity of 0.2x.
* Launch pipeline remains strong: During the quarter, Macrotech launched 3.4msf worth INR 32.5bn across extended eastern suburbs, Pune and Bengaluru, taking the total launches in FY25 to 9.8msf, with an estimated GDV of INR 137bn. Over the next twelve months, company intends to launch 13msf worth INR 188bn of GDV across 17 projects primarily in South Central Mumbai, Western Suburbs (MMR), Pune and Bengaluru.
* Guidance intact; Consolidation to drive growth: In-line with its historical performance, company has maintained its 20% growth guidance and is targeting to achieve bookings of INR 210bn in FY26. Momentum is expected to sustain in business development too as company has guided for INR 250bn worth of new project additions. Management believes the Grade A developers stands to gain significantly from the on-going consolidation – more so in an event of slowdown (if any) since they get more accretive terms in land acquisitions.
* Reported financials: Revenue for the quarter came in at INR 42.2bn (+5% YoY, +3% QoQ) while EBITDA was INR 12.2bn (+17% YoY, -7% QoQ) with margin of 29% (+300bps YoY, -300bps QoQ). The embedded margin for the bookings done in the quarter/year stood at 32%/33%
* Maintain ‘BUY’ with TP of INR 1,480: We remain positive on Lodha as it continues to execute well across all parameters and maintain BUY with a TP of INR 1,480.
Con-call Highlights
* Interest rate cuts along with tax breaks announced in budget will significantly boost the demand for mid income housing
* Residential sales from Palava will grow by over 20% in FY26E and the growth will be higher in FY27E since it will be the first full year post operationalization of the Airoli freeway (expected in 2HFY26)
* Company had 88k walk-ins and 7k bookings in FY25 with average conversion value of INR23mn v/s INR 17m in FY24. Three years back, Company had a conversion rate of about 6.5% which has been increasing significantly from 6.5% to 7.5% in FY24 and this year to almost 8%
* Management is targeting to increase the walk-ins to 93k in FY26 and take the conversions from 8% to 8.5% implying a 12-14% cumulative impact on bookings growth with balance coming from price hikes
* In FY26, company is targeting INR35bn of incremental sales of which management expects Mumbai to contribute INR10-15bn and the balance will be equally contributed by Pune and Bengaluru
* In natural course of business, any particular segment of the industry can witness challenges but given that Macrotech is present across all segments, it is well placed to withstand the challenges
* With the launch of new premium projects at Palava, company is witnessing significant improvement of 10-40% in pricing compared to existing mid income projects
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SEBI Registration Number is INM000010361
