Industry tailwinds, strong project pipeline makes Mahindra Lifespace a good bet: Motilal Oswal

Given the uptick in the real estate sector and preference for branded developers, domestic brokerage house Motilal Oswal has suggested a ‘buy’ recommendation on the stock with a target price of Rs 550, which considering the current stock price implies a potential run-up of up to 17%.

The brokerage highlighted that the company’s management is aiming to grow its pre-sales by 2.5x to Rs 25 billion 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 Rs 50 billion,” said the brokerage report.

Mahindra Lifespace currently commands a strong project pipeline, and in light of it, the brokerage is positive that the real estate developer shall be able to reach its FY25 pre-sales target a year in advance.

“Mahindra Lifespace currently has 9msf of inventory across ongoing and upcoming projects, with a revenue potential of Rs 90 billion. It is also looking to unlock 68 acres on Ghodbunder Road (Thane), which should add 8-10msf to its project pipeline,” the report added.

The company’s Integrated City & Industrial Cluster (IC&IC) segment will continue to be a cash contributor, with around 2,000 acres of inventory across existing and upcoming locations that are likely to generate cumulative surplus cash of Rs 20-22 billion over the next 10 years, noted the brokerage.

Also, the brokerage is optimistic that the company will be able to add projects in the future given the company’s recent success as well as strong visibility and robust cash flow potential from both the residential as well as IC&IC businesses.

Nonetheless, key risks for the stock cited by the brokerage include the company’s inability to close land deals and slowdown in IC&IC leasing space.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)