Buy This Multibagger Small Cap Real Estate Stock For 21% Gains : HDFC Securities

HDFC Securities in its recent report published on Mahindra Lifespce Developers Ltd - a Real Estate (Construction and Contracting) sector company - has given a buy call for a target price of Rs 521 per share. The company sold 0.8msf RERA carpet area in FY22. Presales on a saleable area basis increased to 1.28msf from 1.07msf in FY21. Projects launched were 1.27msf vs 0.94msf in FY21. During the year, the company launched two new projects, "Mahindra Happinest" in Mahindra World City, Chennai and "Mahindra Happinest Kalyan 2" in the Mumbai Metropolitan Region (MMR). It also launched fresh inventory in three of its existing projects, Vicino and Alcove in MMR and Happinest Avadi in Chennai.

Mahindra Lifespace - Stock Outlook & Performance

Stocks of Mahindra Lifespace were closed yesterday at Rs 428.20 per share, and it opened at Rs 429.90 per share. Currently, the stock is trading at Rs 432.85 per share. It touched the 52-week high in early July, this month, on 5. The current market price of Mahindra Lifespace is Rs 24.75 below the 52 week high of Rs 457.60 per share level. Its 52 week low was recorded on 20 July 2021 at Rs 217.27 per share.

It is a small-cap stock with a market capitalisation of Rs 6,683 crore. The stock's PE ratio is 43.29. The P/B ratio is 3.98. ROE is 8.63%.

Based on the estimated target price of Rs 521 per share by the brokerage and the stock's CMP, the company's shares could climb by over 21% in the next 12 months or a year.

In the past 1 week, its share price moved up nearly 3.09%, while in the past 1 month it moved up 9.97%. In the past 1 year, it has given 90.7% positive returns. In 3 and 5 years, its share price moved up by 228.11% and 195.05%, respectively, giving multibagger returns.

Expectations, strategy, growth

Over the next few quarters, we expect Mahindra Lifespaces Developers Ltd (Mahindra Lifespace) to increase its next three-year (FY24-27) presales guidance from Rs 25bn (earlier guidance FY25) to INR 40-50bn, step up business development to Rs 50bn/annum and expand presence in MMR, Bengaluru and NCR markets. Product-wise, we expect the share of premium housing to increase in MMR (to give realisation boost), boosted by new captive launches and BD added through redevelopment/JDA route. The Mahindra Lifespace growth engine has started to deliver and momentum can only build from here on.

AR-FY22 - key operational highlights

The company registered sales of Rs 10.3bn vs. Rs 7bn in FY21. The area sold also increased to 1.28msf, from 1.07msf in FY21. The collection was the highest-ever at Rs 11.5bn, up from Rs 7.6bn in FY21. It launched 1.27msf vs 0.94msf in FY21.

IC&IC: 111acres of land was leased for a lease premium of Rs 3bn vs. 56acres in FY21 for a lease premium of Rs 1.3bn.

BD activity: Mahindra Lifespace acquired three land parcels in FY22 (two in MMR and one in Pune), with a saleable area of 3.08msf and GDV addition of Rs 38bn.

Management commentary

Residential: H2FY22 saw considerable increase in launches as most markets in which the company operates saw significant improvement in the demand-supply balance. Also, the industry was able to pass on the increase in construction cost. Preference for trusted and established developers has opened opportunities in society redevelopment space in Mumbai. From supply side too, this has allowed the company land procurement and partnerships. As MLDL evaluates emerging opportunities in society redevelopment and stressed assets, the strategy is to build a stronger presence in Mumbai and Pune. It will expand its offering under both premium and value segments.

IC&IC business strong recovery

Demand outlook has improved with healthy increase in enquiries seen in FY22. Some of the factors improving demand in this category are: domestic consumption-led growth, preference for domestic manufacturing from importers, MNC diversifying outside China, infra spending, likely Capex cycle, and demand from ecommerce ancillary for warehousing and logistics.

HDFC Securities has estimated Rs 521 per share target price, Suggest buy

Gearing up for the next leg of growth In our Mahindra Lifespace IC note 'Fresh Ambition, Fresh Upside' dated 4 Feb 2021, we focused on Mahindra Lifespaces' three-year journey to rerating, most of which has come true, and it includes (1) aggression; (2) monetisation of group land and development on own land; (3) third-party GDV addition; (4) pick-up in industrial sales; and (5) 3.1x presales vs the longterm Rs 9bn average. Since then, the stock price has multiplied 3x and is ~17% away from our three-year/3.5x TP. Given the tailwinds in industrial business, upcycle in residential business, a robust balance sheet, trustworthy brand image, and a robust business development pipeline, we remain constructive on Mahindra Lifespace and maintain a BUY rating, with an increased NAV-based Target Price of Rs 521/sh (incorporated Pune and Dahisar land).

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.