Buy Mahindra Lifespace Developers Ltd For Target Rs.500 by Choice Institutional Equities Ltd
Strong Pre-sales Momentum to Continue
MAHLIFE Q1FY27 pre-sales and collections rose 106.0% and 1.7% YoY, respectively, with sustenance sales contributing 42% of pre-sales. Average price realisation grew significantly by 99.1% YoY and 11.4% QoQ, driven by the ultra-premium South Mumbai launch (BeaconHill). MAHLIFE acquired a 15-acre land parcel in Kandivali East (1.8 msf) with an estimated GDV of INR ~56 Bn.
Thane and Bhandup Projects to be a Key Turning Point
The Thane and Bhandup projects’ GDV is INR 70–80 Bn and INR 120 Bn, respectively, jointly accounting for ~45% of its total GDV (gross development value) of INR 499 Bn. As MAHLIFE especially caters to mid-premium to premium segments, Thane and Bhandup markets in Mumbai are its sweet spot. These projects will be a mix of commercial and residential projects and will be launched in multiple phases over time
Plotted Development Projects to Drive Healthy Operational Cash Flows
Following the successful launch of its first plotted project in Chennai, MAHLIFE is accelerating its second project and Project Pink in Jaipur, with multiple launches planned in the next 12–18 months. Plotted developments offer higher sales velocity and superior IRRs as compared to residential projects. This enables faster fund realisation and stronger cash flows.
IC&IC Segment Velocity Expected to Improve
The management expects the leasing velocity to improve, guiding for revenue of INR 4–5 Bn annually. However, it is a lumpy business by nature. The company is optimistic about stronger demand in the next 2 years. MAHLIFE’s long-term plan remains monetisation of its IC&IC business (Integrated Cities & Industrial Clusters).
Valuation: We maintain our ‘BUY’ rating on MAHLIFE with a TP of INR 500, factoring in the Residential Business, IC&IC and the company’s historical land bank.
Risks: A possible broad-based slowdown in the domestic economy and a probable delay in regulatory procedures.
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