Motilal Oswal's research report on Macrotech Developers
During its IPO in FY21, Macrotech Developers (LODHA) outlined a strategy to expand into the micro-markets of MMR and Pune – where the company had limited or zero presence – via asset-light joint development agreements (JDA). -Since then LODHA has acquired ~23msf of projects with gross development value (GDV) of INR345b spread across the new markets of Eastern (INR150b) and Western (INR32b) suburbs in Mumbai, Pune (INR61b) and Bengaluru (INR12b) as well as its existing markets of South and Central Mumbai (INR76b) and Thane (INR16b). More importantly, out of the 17 projects added to date, the company has already launched 11 projects with acquisition-to-launch (turnaround) time of zero to three quarters. Due to faster turnarounds, these JDAs contributed to INR30b or 27% of pre-sales in FY23, up from 6% in FY22. As a result, LODHA’s market share in Mumbai improved to ~10% in FY23 from 7% in FY21. It made steady progress in Pune too and captured 2% market share over the last two years. As management expects to continue the business development momentum with targeted addition of INR175b in FY24, the share of JDA projects is also likely to rise gradually to 40% over the next two years.
Outlook
Given the recent spike in real estate stock prices, our preference remains inclined towards players with an ability to sustain pre-sales growth rate over a medium term along with healthy profitability. We reiterate our BUY rating on the stock with our unchanged SoTP-based TP of INR775 indicating a potential upside of 21%.
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