The stock of Mahindra Lifespace Developers has been witnessing a dream run this year so far.
The stock of the residential developer hit its 52-week high of ₹554.55 on September 13, 2022, and saw some profit-booking after that. Still, on a year-to-date (YTD) basis, it is up 94%.
Brokerages and analysts believe the bullish run of the stock is not done yet. Brokerage firm Motilal Oswal Financial Services has a buy call on the stock with a target price of ₹550, implying a 17% upside from the current market level.
The company has a strong presence in Mumbai and Pune and as the brokerage firm highlighted, It is gradually expanding its footprint in Bengaluru.
Mahindra Lifespace also operates the Integrated City & Industrial Cluster (IC&IC) segment, which monetizes the land bank by providing plug-and-play industrial infrastructure for manufacturing units, Motilal Oswal pointed out.
The company has lagged behind its peers due to a lack of aggressive strategies which is likely to change now.
"Despite being in business for close to three decades, Mahindra Lifespace’s lack of aggression has led to a stagnant pre-sales of ₹700-800 crore over the last seven years and has lagged its peers in terms of growth. However, given the industry tailwinds and shift towards branded developers, Mahindra group is now gearing up to unlock the growth potential in its real estate vertical and has also undergone some key senior management changes," said Motilal Oswal.
The brokerage firm underscored that the company's management aims to grow its pre-sales by 2.5 times to ₹2500 crore in the next three years (FY25E) by scaling up launches and project additions. The company has already added 9msf of projects over the last three years in its core markets and is further evaluating projects worth ₹5,000 crore.
"Mahindra Lifespace currently has 9msf of inventory across ongoing and upcoming projects, with a revenue potential of ₹9,000 crore. It is also looking to unlock 68 acres on Ghodbunder Road (Thane), which should add 8-10msf to its project pipeline. Given the strong pipeline, we believe its FY25 pre-sales target can be achieved a year in advance," said Motilal Oswal.
The brokerage firm believes the IC&IC segment will continue to be a cash contributor, with nearly 2,000 acres of
inventory across existing and upcoming locations that is likely to generate cumulative surplus cash of ₹2,000-2,200 crore over the next 10 years.
"We are confident of Mahindra Lifespace’s ability to add projects in the future, given its: (1) strong visibility and recent success, and (2) robust cash flow potential from both the residential and IC&IC businesses. Inability to close land deals and a slowdown in IC&IC leasing are the key risks," said Motilal Oswal.
On the technical front, the stock looks poised for further rise.
As per Akhilesh Jat, Category Manager - Equity Research, CapitalVia Global Research, the stock is moving in higher-high and higher low formation and it has been consistently maintaining its uptrend and can be seen trading in a rising channel on broader charts.
"The primary trend of the stock is positive as it is trading above its 50, 100 & 200-day exponential moving averages. During the recent correction, the stock price has taken support at the lower edge of its ascending channel on the daily chart," said Jat.
Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers pointed out that the stock has been making higher highs and higher lows on the weekly scale since December 2021 which resulted in 154% appreciation.
"At the current juncture, the stock has made a bearish engulfing candlestick pattern on the weekly scale after testing an all-time high. On the indicator front, weekly RSI is displaying negative divergence along with weekly MACD making a bearish cross which is a sign of caution in coming sessions. From ₹490 to ₹530 is the supply zone so fresh buying is not advisable. If already holding then book profits if it retests ₹500- ₹510 again," said Patel.
According to a MintGenie poll, an average of 7 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.