Stock To Buy: Company Reported 52% YoY Growth In Sales, Buy For 34% Potential Upside

Leading brokerage firm ICICI Securities is bullish on Macrotech Developers Ltd. (LODHA), recommended "buy" with a target price of Rs 1,348 per share. It sees a potential upside of up to 34% from its current level considering the given target price to the stock of the company.

LODHA is a large-cap real estate sector company with a market capitalisation of Rs. 10,928. The company made its debut on the stock exchange in April 2021.

LODHA achieved its best-ever July-September sales bookings in Q2FY23 worth Rs31.5bn (Isec estimate of Rs27.5bn) which was driven by a combination of monetization of ready/completed inventory and new launches.

Stock Outlook & Returns

Today, its share price gained 0.91% from its previous close and ended up at Rs 1,006.35 per share, the current market price. Its 52 week low was recorded in May 2022 at Rs 814.20 and 52-week high in December 2021 at Rs 1,539, respectively.

It has given a multibagger return of 116.3% to its shareholders since its listing in April 2021. Its share price has surged 8.89% in the past 1 week, however, it has fallen 9.15% in 1 month and 8.75% in 3 months, respectively. In the past 1 year, its shares have fallen 10.39%. 

Strong quarter for sales bookings

LODHA clocked Q2FY23 India business sales bookings worth Rs31.5bn (up 57% YoY) vs. Isec estimate of Rs27.5bn and is the highest quarterly sales booking clocked by the company till date for the July-September period, which is typically the weakest quarter of the year. "We believe that the new launches in Mahalaxmi (South/Central Mumbai) and Vikhroli (eastern suburbs) may be the key drivers for sales bookings apart from monetization of inventory in ongoing/completed projects. With a strong performance in H1FY23 where the company has clocked Rs60.0bn of sales bookings (52% of FY23 sales guidance of Rs115bn), the company is well on track to achieve its guidance for FY23," the brokerage has said.  

Net debt flattish QoQ on lower collections and strong business development

The company's India business net debt reduced by Rs4.4bn QoQ to Rs88.6bn in Jun'22 from Rs93.0bn in Mar'22. In Q2FY23, the company's net debt reduced by Rs0.6bn QoQ to Rs88.0bn (flat QoQ). The lower net debt reduction is primarily owing to lower Q2FY23 collections of Rs23.8bn (decline of 9% QoQ) due to slower construction activity during monsoon and deferral of registrations during 15 days of inauspicious period in India (Pitrupaksh/Shraadh). In the company's London investments, the USD225mn bonds have been fully repaid in Sep'22, 6 months ahead of schedule which means that the company has no further obligations on its India balance sheet w.r.t to the London investments. 

On track to achieve over Rs100bn of annual sales bookings over FY23-24E

Post listing in Q1FY22, the company has added new projects having total saleable area of 8.8msf having an estimated GDV of Rs146.0bn in FY22, majority of which are slated for FY23 launch. "Considering the strong launch pipeline and sustenance in sales momentum, we estimate sales bookings of Rs110bn in FY23E vs. company guidance of Rs115bn (Rs105bn from core residential business and Rs10bn from non-core business) and Rs119bn in FY24E. The company is targeting adding new projects having GDV of Rs115bn in FY23 of which it has signed 3 new JDA projects in Q1FY23 having 5.1msf of saleable area with estimated GDV of Rs62.0bn and in Q2FY23 it has signed 4 new projects with 2.2msf of saleable area with estimated GDV of Rs31.0bn. While rise in mortgage rates remain key risk to demand, the company is providing partial developer subvention for interest rate increase beyond 6.99% up to June 2024 to mitigate this risk (capped at 150bps or ~8.5%)," the brokerage has said. 

Disclaimer

The stock has been picked from the brokerage report of ICICI 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 making any investment decision.