Motilal Oswal Places A Buy Call On The Stock Of Mahindra Lifespace Developers

Markets continue to be exceedingly volatile as global cues continue to be unpredictable. Broking firm Motilal Oswal has placed a buy call on the stock of Mahindra Lifespace Developers for gains of upto 17% on the stock.

Mahindra Lifespace Developers

The company is a part of Mahindra group, and 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.

Good growth prospects

According to Motilal Oswal, the Management aims to grow its pre-sales by 2.5 times to Rs 25 billion in the next three years (FY25E) by scaling up launches and project additions. The company has already added 9msf of projects over the last three years in its core markets and is further evaluating projects worth Rs 50 billion.

"The company currently has 9 million square feet of inventory across ongoing and upcoming projects, with a revenue potential of Rs 90 billion. It is also looking to unlock 68 acres on Ghodbunder Road (Thane), which should add 8-10 million square feet to its project pipeline. Given the strong pipeline, we believe its FY25 pre-sales target can be achieved a year in advance," Motilal Oswal has said in its report.

Target price of Rs 550 on the stock

Motilal Oswal says that its is confident of the company'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 Mahindra Lifespace Developers with a Buy rating and an SoTP-based target price of Rs 550, implying a potential upside of 17%," the brokerage has said.

Good growth likely in the residential segment

According to Motilal Oswal. the company's residential segment is expected to generate cumulative operating cash flows of Rs 14 billion (net off the overheads) from its existing pipeline over FY23-25E. The company saw a pick-up in leasing in its IC&IC segment as it leased 110 acres. "With 990 acres of inventory at its existing locations in Chennai and Jaipur, and 1,000 acres in Ahmedabad, Pune, and Chennai Phase II to be monetized under the IC&IC segment, the management aims to clock an annual leasing income of Rs 5 billion by FY25E," Motilal Oswal has said in its report.