Buy Mahindra Lifespace Developers Ltd for the Target Rs 500 by Emkay Global Financial Services Ltd
We maintain BUY on Mahindra Lifespace Developers (MAHLIFE) and revise up TP by ~9% to Rs500 from Rs460, based on 8x EV/embedded EBITDA at a 26% premium to NAV (the stock is trading at a 6% discount to NAV). On account of a healthy launch pipeline and robust business development, we revise up our pre-sales estimates by 6%/8%/5% to Rs48bn/Rs58bn/Rs73bn in FY27e/FY28e/FY29e respectively. In 1QFY27, MAHLIFE delivered healthy presales of Rs9.3bn (106% yoy) and business development of Rs56bn GDV. Collections were muted in 1Q but will pick up from 2Q, as Rainforest sees significant collections from 2Q. MAHLIFE’s healthy launch pipeline of +Rs63bn and unsold inventory of Rs79bn for the remainder of FY27 provide adequate visibility to achieve its FY27 pre-sales guidance of Rs45-50bn. The balance sheet remains strong, with a net-debt-to-equity ratio of -0.2x (including JVs).
1QFY27 snapshot
Operational: In 1QFY27, MAHLIFE reported pre-sales of Rs9.25bn (+106% yoy), vs our estimate of Rs9.0bn. The Rainforest project (50%) and sustenance sales (42%), primarily from Blossom, Vista, Marina 64, and IvyLush, contributed to 1QFY27 pre-sales. Collections and operating cashflow (OCF): Collections stood at Rs5.3bn (+2% yoy), an uptick is expected from 2QFY27, supported by the Rainforest project. Net operating cash flow stood at Rs1.35bn (-31% yoy). Financial: Revenue stood at Rs9.7bn (+3000% yoy); IC&IC revenue stood at Rs0.41bn (-66% yoy), EBITDA at Rs0.9bn (vs EBITDA loss of Rs0.6bn), and PAT at Rs0.9bn (+68% yoy). Reported EBITDA margin saw an uptick due to the completion of high-margin premium projects Eden Phase 2 and Luminaire.
Healthy launch pipeline to assist in achieving FY27 pre-sales guidance
MAHLIFE has a healthy launch pipeline of +Rs63bn GDV for the remainder of the year. company has already launched Beacon (Mahalaxmi) and Citadel Phase 2 in 1QFY27, but sales will be registered from 2Q. Mahalunge Phase 1 (Pune), Sai Baba phase 1 (MMR), Navrat (Bengaluru), and West Era (MMR) will be launched in 2HFY27. This, coupled with unsold inventory of Rs79bn, provides adequate visibility to achieve the FY27 pre-sales guidance of Rs45-50bn. A 29% absorption across the launch pipeline and unsold inventory would help achieve pre-sales of Rs48.0bn in FY27
Business development (BD) momentum to continue; IC&IC to pick up
MAHLIFE added one project in 1QFY27 with an estimated GDV of Rs56bn and currently has a portfolio of Rs377bn GDV to be launched. Over the past two years, MAHLIFE added Rs360bn GDV of projects. The BD momentum is expected to continue, with the management guiding for GDV addition of Rs100-200bn in FY27. MMR is to constitute 60% of the project portfolio, while Bengaluru and Pune are to constitute 20% each. IC&IC revenue remained low during the quarter; however, the 2Q pipeline remains strong, and an uptick in revenue is expected for the remaining FY.
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