Midcap Developers Stock To Buy, Pre-sales Growth Targeted To Rs. 25b: Motilal Oswal

Leading brokerage firm Motilal Oswal is suggesting investors to buy the stock of Mahindra Lifespace Developers. The company's new management, with its aligned growth vision, is targeting to grow its pre-sales by 2.5x to Rs. 25b over the next 3 years (FY25E) through scaling up launches and augmented business development.

Stock To Buy: Target Price

The Current Market Price (CMP) of Mahindra Lifespace Developers (MLDL) is around Rs. 472. Motilal Oswal has estimated a Target Price for the stock at Rs. 550. This stock has the potential to give a 17% return, in the upcoming 1 year. It is a mid-cap stock with a market capitalization of around Rs. 7,363 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 472
Target Price	Rs. 550
Potential 1 year return	17.00%
52 week high share price	Rs. 550.75
52 week low share price	Rs. 218.50

Revenue potential

MLDL currently has 9msf of inventory across ongoing and upcoming projects, with a revenue potential of INR90b. It is also looking to unlock 68 acres on Ghodbunder Road (Thane), which should add 8-10msf to its project pipeline. Given the strong pipeline, we believe its FY25 pre-sales target can be achieved a year in advance.

Stock Valuation

According to Motilal Oswal, "We are confident of MLDL's ability to add projects in the future, given its strong visibility and recent success, and robust cash flow potential from both the Residential and IC&IC businesses. We initiate coverage on MLDL with a Buy rating and an SoTP-based TP of Rs. 550, implying a potential upside of 17%. However, key risks are inability to close land deals and slowdown in IC&IC leasing."

Industry tailwinds and company business

Despite being in business for close to 3 decades, MLDL's lack of aggression has led to a stagnant pre-sales of Rs. 7-8b over the last 7 years and has lagged its peers in terms of growth. However, given the industry tailwinds and shift towards branded developers, Mahindra group is now gearing up to unlock the growth potential in its real estate vertical and has also undergone some key senior management changes. Management aims to grow its pre-sales by 2.5x to Rs. 25b in the next 3 years (FY25E) by scaling up launches and project additions. The company has already added 9msf of projects over the last 3 years in its core markets and is further evaluating projects worth Rs. 50b.

Company Portfolio

Mahindra Lifespace Developers (MLDL), a part of Mahindra group, is one of the leading residential developers with a strong presence in Mumbai and Pune. It is gradually expanding its footprint in Bengaluru. MLDL also operates the Integrated City & Industrial Cluster (IC&IC) segment in which it monetizes the land bank by providing plug and play industrial infrastructure for manufacturing units.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.