Mahindra Lifespaces - Mixed performance - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

Mahindra Lifespaces Developers Ltd (MLDL) reported operationally a decent quarter with presales of INR 1.4bn (sustenance sales, ~4x/-58% YoY/QoQ), considering the absence of new launches during the quarter. MLDL lost six weeks due to COVID, which delayed new launches. We expect bunching up of new launches in the rest of 9MFY22 (~2mn sqft, Rs 12bn+ in value). MLDL has MOUs in place for new land addition (subject to final agreement sign-ups), which shall add INR 25bn+ presales potential. It announced a bonus of two shares for one share held in the company. Given strong growth trajectory, robust balance sheet, trustworthy brand, and tailwinds for organised players, we remain constructive on MLDL and maintain a BUY rating. We move to our Mar-23 NAV based TP of INR 1,047/sh (vs earlier 1-yr Mar-22 TP of INR 773/sh). NAV increase is driven by addition of new development potential and development value of the Ghodbunder project (likely launch in FY23E).

Financial highlights: Revenue: INR 1.5bn (10x/+165% YoY/QoQ, beat at ~5.5x est.). EBITDA: INR (242) mn (INR (200)/(371) mn in Q1FY21/Q4FY21, vs INR (138) mn est.). Interest cost: INR 12mn (-66.8%/-33.9% YoY/QoQ). Other income: INR 74mn (INR 8/70 mn Q1FY21/Q4FY21). RPAT/APAT: INR (139) mn (INR (210)/(272) mn Q1FY21/Q4FY21), vs an estimated loss of INR 77mn. Higher-than-expected revenue recognition was offset by lopsided cost recognition. MLDL has been reporting losses for the past six quarters and is expected to be back in the black by the next 2-3 quarters.

Decent performance sans launches: The presales value for the quarter came in at INR 1.4bn (~4x/-58% YoY/QoQ) and volume stood at 0.2msf (~2x/-65% YoY/QoQ). Sales were entirely through sustenance ones as MLDL did not launch any project during the quarter. While planned launches of INR 12bn for FY22 remain on track, the Ghodbunder project launch is expected by FY23. MLDL leased out 6.7acres for INR 143mn during Q1FY22.

Healthy balance sheet supportive of growth: MLDL's consolidated net debt stood at INR 1.1bn with net D/E at 0.06x, which provides ample room for expansion. The standalone borrowing cost at 5.9% is the lowest vs peers, which is a good sign for land bank acquisitions. MLDL needs to add ~INR 20bn saleable area annually to achieve the target of INR 25bn annual sales by FY25. This could increase the net D/E ratio to 0.5x by FY24, which is in a comfortable range and near the upper end of MLDL guidance.

Shares of MAHINDRA LIFESPACE DEVELOPERS LTD. was last trading in BSE at Rs. 765 as compared to the previous close of Rs. 756.1. The total number of shares traded during the day was 31368 in over 2495 trades.

The stock hit an intraday high of Rs. 778.05 and intraday low of 747. The net turnover during the day was Rs. 23943204.

Source : Equity Bulls

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