Buy This Real Estate Stock, Shares Could Jump 20%

Brokerage firm Sharekhan has recommended buying the stock of Mahindra Lifespace Developers in its report.

Management raises annual residential sales

Sharekhan has said that it interacted with the management of Mahindra Lifespace Developers Limited (MLDL).

"Despite a strong Q1FY2023, the management has retained annual residential sales booking and IC&IC lease at Rs. 2500 crores and Rs. 500 crores respectively by FY2025. It has a strong launch pipeline of around 3msf post Q1FY2023 which comprises phases of ongoing projects along with two key new project launches in Kandivali, Mumbai, and Pimpri, Pune. On its IC&IC business, leasing closures are expected to continue in Q2FY2023 (closures of 1-2 large leasing deals at advanced stages) although it may not be at same velocity as seen in Q1FY2023," the brokerage has said.

3 Development projects for societies

On society redevelopment, it is at the discussion stage for three projects. "It may initially test the waters by undertaking one or two small to mid-size projects. On business development, it expects to conclude Rs. 500 crore projects in couple of months (versus earlier September) while BD pipeline visibility stands at Rs. 5000 crores. The group's focus on the company remains sharp, it being one of the targeted three unicorns within the group companies," Sharekhan has added.

IC&IC business to see a pick up in momentum

According to Mahindra Lifespace Developers the company saw a strong scale up in leasing during Q1FY2023 which stood at Rs. 118 crores (Rs. 298 crore in FY2022) led by MWC Jaipur. "The leasing closures are expected to continue in Q2FY2023 although the velocity may not be as similar as in Q1FY2023. It is at final stages of closing one to two large leasing deals. Despite positive tailwinds like the government's push on domestic manufacturing, DESH bill, china plus one strategy, Make in India push etc, the management stayed conservative by setting a Rs. 500 crore annual lease target by FY2025," the brokerage has said.

Society redevelopment projects

The company has a business development pipeline of Rs. 5000 crores out of which it expects to close Rs. 500 crore deals in a couple of months. "It continues to maintain strong cash balance (Rs. 202 crores as on Q1FY2023) for business development while it has the leeway to leverage its balance sheet for large project acquisitions. It will also be venturing into society redevelopment projects by initially undertaking one to two small to mid-size projects. It is already under discussion for three redevelopment projects," Sharekhan has said.

Revised price target of Rs 640

The company has been able to ramp up its sales booking while it has a strong launch pipeline of projects for the balance fiscal. "On the other hand, it has also added new projects with further land deals in the pipeline. The company's low gearing can be utilized to raise debt to fund land acquisitions. The company is expected to foray into society redevelopment during the current fiscal. The Development of Enterprise and Service Hubs (DESH) bill is expected to provide further traction to its IC&IC business. We retain a Buy on the stock with a revised PT of Rs. 640 factoring in increased traction in IC&IC leasing and residential sales along with assigning higher land value," the brokerage has said.

Execution

During FY2023, the company is likely to book revenues from some portion in Centralis and Kalyan 1 Happinest project apart from entire Roots projects.