Mahindra Lifespace Developers - Strong Growth Roadmap Laid Out: ICICI Direct

ICICI Direct Report

Key Investment Thesis:

Lays down five times growth aspiration over the next five years:

The new CEO Amit Sinha (erstwhile Mahindra Group strategy President) has outlined ambitious business growth of five times over the next five years from~ Rs 2268 crore of residential and industrial cluster business sales to Rs 8000-10000 crore by FY28.

Of the same, growth will be largely from residential segment. To achieve its growth target, the company is aiming for a project pipeline with revenue potential of Rs 40,000-50,000 over the next four years, of which ~Rs 15000-16000 crore have already been signed up including 68 acres of land at Thane (~Rs 8000 crore), Mahindra land at Kandivali and Citadel at Pune.

Launches in FY24 to keep sales momentum robust: Mahindra Lifespace has shown strong traction in sales momentum over the last two years which has sharply increased from Rs 695 crore of pre sales in FY21 to Rs 1812 crore in FY23.

Going ahead, the company is aiming to launch eight-nine projects with gross development value of Rs 3500- 4000 crore in FY24. We expect sales value jumping to ~1.5 times from FY23 levels at ~Rs 2800 crore in FY25E, based on the launch pipelines, and new land addition.

Integrated cities / industrial clusters business to be stable: The company overall has an inventory of ~1400 acres with total sales value of ~Rs 5000 crore. The management expects to momentum to remain healthy and stable at Rs 500 crore, with strong pipeline of enquiries backed by-

1. expansion of PLI scheme,

2. the lower tax rates for new manufacturing facilities, and

3. the global realignment of manufacturing and supply chains favoring India.

Rating and target price

We like Mahindra Lifespace given its strong parentage, management’s focus on expanding its overall scale of operation and a comfortable balance sheet. With strong focus on scalability, the company is poised for strong growth in medium and long term.

We maintain our 'Buy' rating. We value Mahindra Lifespace at Rs 650 per share

About the stock:

Mahindra Lifespace Developers is the real estate and infrastructure development business of the Mahindra Group. It has ~34.5 million square feet of completed, ongoing and forthcoming residential projects across seven cities and over 5,000 acres of ongoing and forthcoming projects under development at its integrated cities / industrial clusters across four locations.

It has sharply scaled up sales momentum with FY23 sales value at Rs 1812 crore versus Rs 695 crore in FY21. It intends to continue its scalability drive through new business developments ahead and aims ~five times business in five years

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