After rising 32 percent in the last 1 year, more upside is seen in realty stock Macrotech Developers. Domestic brokerage house Motilal Oswal expects the stock to jump nearly 50 percent in the next 1 year on the back of the positive growth outlook in the Indian housing space.
It has a 'buy' call on the stock with a target price of ₹1,570.
According to the brokerage, the Indian housing market is on the cusp of multi-year growth and the industry has the potential to grow by 3-4 times in the next decade aided by rising income levels and improving demography.
Amid this backdrop, Macrotech is aiming for a 20 percent CAGR in pre-sales in the medium term backed by a robust launch pipeline and targeted growth strategy, the brokerage said.
In 2022, the company expanded into newer micro markets across Mumbai Metropolitan Region (MMR) and Pune through the capital-light JDA (joint development agreements) route and added 11 new projects amounting to nearly ₹15,000 crore of cumulative gross development value (GDV), it noted.
The firm also intends to grow in Bengaluru, which is a steady but fragmented market with the top five players having 30 percent aggregate market share, it added.
During the year, the company entered into partnerships with two strategic investors to establish a pan-India presence in digital infrastructure space that includes logistics, industrial parks and in-city fulfillment centers. The UK projects too posted the best ever pre-sales of GBP531m and the company is likely to get a part of its investment repatriated during FY23E," informed MOSL.
Healthy Pipeline
As per the brokerage, Macrotech has outlined a project pipeline of 11msf to be launched in FY23E, including some of the recently signed projects along with its first project in Bengaluru and another 20 msf to be launched over the next 2-3 years.
In FY22, MDL has signed 11 projects and the management aims to continue with the new project addition momentum and add projects with a GDV of ₹15,000 crore in FY23E, it pointed out.
While the company has progressed well in increasing its exposure in Mumbai, it is aiming at similar deal additions in Pune and in the newly entered market of Bengaluru. During the recent concall, management highlighted that it has significantly expanded the company’s addressable market to ₹2.5 lakh crore by tapping into the newer micro-markets mentioned above, MOSL pointed out.
Earnings
In the Juen quarter, the realty firm posted a 68 percent YoY rise in its net profit to ₹270.80 crore for the June quarter on better sales. The company's net profit stood at ₹160.91 crore in the year-ago period.
Total income also jumped 53 percent to ₹2,675.78 crore in the first quarter of this fiscal from ₹1,749.97 crore in the corresponding period of the previous year.
On the performance, Macrotech Developers Ltd MD and CEO Abhishek Lodha highlighted that the April-June period was its best-ever first quarter with ₹2,814 crore of pre-sales from India business.
"With this strong start to the FY23, we are pleased that 75 percent of the sales growth that we had forecasted for this year ( ₹1,857 crore out of ₹2,500 crore required to grow from ₹9,024 crore to ₹11,500 crore) has already been delivered," Lodha said.
For FY22, the company's EBITDA stood at ₹2,100 crore, up 55 percent YoY, with an operating margin of 23 percent versus 25 percent in FY21. Its net profit for FY22 came in at ₹1200 crore versus a loss of ₹250 crore in FY22.
Return on Equity (RoE)
The accelerated deleveraging aided by capital raise and strong OCF normalized the firm's RoE to 14 percent in FY22 from over 40 percent in FY19, said MOSL.
The company is targeting to improve its RoE to 20 percent in the medium term, which MOSL believes will be driven by: a) improving PAT margins through operating leverage, b) higher asset turns led by an increase in completions and c) rising share of JDA projects capping the increase in assets.
Estimates
The brokerage revises its FY24E Revenue, EBITDA, and PAT by 10 percent, 19 percent and 19 percent, respectively. MOSL maintained its pre-sales and cash flow estimates for the firm as new project additions are already built-in into its estimates.
"The company continues to progress well both on deleveraging as well as seeking its ‘20-20-20’ medium-term growth strategy as highlighted in our recent report. At CMP, the stock trades at 1.0x P/NAV indicating a limited premium for growth that the company will achieve beyond FY23E. Maintain BUY with an unchanged target price of ₹1,570 per share," said the brokerage.
Stock and peers
Even though the stock has risen over 30 percent in the last 1 year, it has lost 18 percent in 2022 so far.
In comparison, the Nifty Realty index has added 11 percent in the last 1 year.
Among peers, 3 Nifty Realty constituents outperformed Macrotech while the remaining underperformed in the last 1 year.
Brigade Enterprises surged the most, 52 percent in the last 1 year, followed by Phoenix Mills and Oberoi Realty, up 45 percent and 33 percent, respectively.
Among losers, only Godrej Properties and Indiabulls Real Estate were in the red for the last 1 year, down 12 percent and 55 percent, respectively.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
