Lodha’s FY22 guidance is ambitious, but Street is ready to bite
_1617259799177_1627966575907.jpg "Macrotech has a launch pipeline of around 4 million square feet in FY22 and accelerated business development plans of at least two deals per quarter,")
PremiumThe company's management said that it is confident of achieving pre-sales target of Rs8,000 crore in FY22 in the residential segment despite disruption in 1QFY22
Investors of Macrotech Developers Ltd (Lodha) are excited about the realty company’s growth projections. So much so, that they have overlooked its subdued June-quarter earnings. The Lodha management exuded confidence in meeting its FY22 sales guidance of ₹9,000 crore as against ₹5,970 crore in FY21.
In a post-earnings conference call, the management said April and May had very limited sales on account of the second covid wave, while June saw a sharp recovery with sales of ₹650 crore. Out of the overall sales target for FY22, residential sales are expected to contribute ₹8,000 crore. According to the management, the sales momentum continued in July and launches worth ₹5,275 crore are planned for FY22. All these factors gave a boost to its stock, which hit a new 52-week high of ₹944 on the NSE on Tuesday. However, analysts caution that in the backdrop of covid-led disruptions, this target seems ambitious.
“To achieve this kind of sales, many things have to fall into place. For instance, the recovery in sales has to be solid and no potential third wave. Even though the management is optimistic of meeting this target, anything below ₹8,000 crore would come as a dampener for the stock, which has sharply rallied since listing," an analyst with a domestic brokerage house said on condition of anonymity.
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From its listing price of ₹436 in April, the stock is up around 90%. The analyst added that the Street would keep an eye on whether Lodha’s strategy to avoid price hikes for affordable housing projects works out or not. Affordable and mid-income segment, which was the most hit by the pandemic, accounted for 53% pre-sales in the June quarter. The management said that it expects this segment to contribute around ₹2,000 crore to its overall FY22 sales target.
At the same time, the firm has announced the addition of two new projects through joint development agreements (JDAs). The management said that it has already entered into four JDAs across the Mumbai Metropolitan Region and Pune.
The company intends to sign ₹8,000-10,000 crore worth JDAs annually over the coming years and expects these projects to contribute 20% to profit before tax.
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With a strong sales momentum, the company expects a further reduction in debt. Its net debt is expected to drop to ₹10,400 crore by March 2022. As of Q1FY22, consolidated net debt stood at ₹12,430 crore, a reduction of ₹3,600 crore aided by IPO proceeds of ₹2,400 crore and promoter loan repayment of ₹1,630 crore. The management added that its average cost of debt came down from 12.3% in March to 11.6% in June.
As far as Q1FY22 earnings are concerned, on a sequential basis, revenues at ₹1,600 crore and net profit at ₹160 crore declined 37% and 48%. Operating performance was weak with adjusted Ebitda at ₹5,760 crore, which was almost half of ₹9,430 crore in Q4FY21. Ebitda is short for earnings before interest, tax, depreciation and amortization.
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