MLIFE clocked 0.4msf of sales bookings in Q4FY22 worth Rs3.3bn (Isec estimate of Rs4.5bn) as Kanakpura, Bengaluru and Luminaire, Gurugram launches got pushed forward to H1FY23. Heading into FY23E, the company has added new projects across MMR and Pune having a Gross Development Value (GDV) of Rs55bn between Apr'21 to Apr'22. With this, the stage is now set for MLIFE to grow its sales by 2-3x over FY22-25E (Rs10.3bn of bookings achieved in FY22) subject to approvals for these projects coming through. We reiterate our BUY rating on MLIFE with a revised Mar'22E DCF-based target price of Rs430/share (earlier: Rs381) as we include value of new Pimpri, Pune land and retain our 40% premium to FY22 NAV of Rs307/share considering the company's strong business development pipeline. Key risks to our rating are demand slowdown in the Indian residential market and rising interest rates in India.
- Steady sales momentum, Q1FY23 to see new launches: MLIFE clocked 0.4msf of sales bookings in Q4FY22 worth Rs3.3bn (Isec estimate of Rs4.5bn) as Kanakpura, Bengaluru and Luminaire, Gurugram launches got pushed forward to H1FY23. For FY22 overall, the company has clocked sales bookings of 1.3msf worth Rs10.3bn vs. Rs7.0bn in FY21 with healthy collections of Rs11.5bn. FY22 also saw the company seeing traction in its integrated clusters and integrated cities business (IC & IC business) with 111acres leased to 18 customers for Rs3.0bn, primarily in Jaipur. On the costs front, the company has seen a 12-15% increase in construction costs in FY22 which have been mitigated through price hikes of 4-14% across projects. Going forward, the company will be prudent in launching new phases considering that costs are estimated to go up further.
- All eyes on launches of new projects added in FY22: MLIFE has concluded three land deals in FY22 aggregating to a total GDV of Rs38bn of which the Dahisar JDA (GDV of Rs10bn) and Kandivali East outright purchase (GDV of Rs25bn) were the major projects. Also, the company has announced the acquisition of another 11.5acres of land in Pimpri, Pune having 2msf of saleable area with an estimated GDV of Rs17bn. With cumulative GDV accretion of Rs55bn over the last 12 months, the stage is now set for MLIFE to grow its sales by 2-3x over FY22-25E subject to approvals for these projects coming through.
- Thane land parcel may add significant value if approvals come through: MLIFE has an unencumbered land parcel of 68acres along the Ghodbunder Road in Thane, MMR where current residential prices hover between Rs7,000-8,000/psf and this project, if launched, can potentially have saleable area of ~10msf. While the company is working towards getting this land parcel ready for launch sometime in H1FY24E, we await approvals for the project coming through before incorporating this in our estimates.
- Opportunity to grow further post FY25E remains huge: With MLIFE targeting to generate Rs25bn of sales value annually by FY25E at an EBITDA margin in excess of 20%, we believe that this business can potentially generate over Rs5bn of annual operating surplus cash flow (OCF surplus) in 3-4 years' time. Assigning an 8-10x OCF multiple, MLIFE's residential business could be worth between Rs40-50bn in the medium term. Beyond FY25E, the company has huge scope to grow considering that it may have just over 1% residential market share in Tier 1 cities by FY25E.
Shares of Mahindra Lifespace Developers Limited was last trading in BSE at Rs. 378.65 as compared to the previous close of Rs. 369.80. The total number of shares traded during the day was 50124 in over 2388 trades.
The stock hit an intraday high of Rs. 389.55 and intraday low of 369.10. The net turnover during the day was Rs. 19163294.00. |
