Despite strong Q4 results, brokerages warn of headwinds for Macrotech. What should you do?

Stock of Mumbai-based real estate developer Macrotech Developers has become a hot pick for several brokerages after the company reported strong January-to-March quarter earnings last week. While foreign brokerage Jefferies has maintained a ‘buy’ rating on the Lodha Group company estimating a 35% upside, domestic brokerage HDFC Securities has left the price unchanged. Meanwhile, ICICI Securities has slashed the target price while cautioning for headwinds. Should you buy, sell or hold this stock?

On Saturday, Marcrotech Developers reported a 40% YoY jump in its FY23 PAT (adjusted for forex and exceptional items) at Rs 1,769 crore on the back of record pre-sales. The net profit for the January to March quarter stood at Rs 751 crore.

The Q4FY23 pre-sales were worth Rs 3,025 crore while the annual pre-sales jumped up over 34% YoY to Rs 12,064 crore. The revenue from operations for the financial year was at Rs 9,470 crore, up 3% YoY while it stood at Rs 3,255 crore for Q4FY23.

Jefferies on Macrotech Developers: Buy | Target: Rs 1,225 | Upside: 35%
Jefferies has lowered its price target on Macrotech to Rs 1,225 from Rs 1,325 while maintaining a 'buy' stance on the stock. This is a 35% upside from the price of Rs 908 at which the counter was recommended. The brokerage is premising its estimates on the likelihood of growth in pre-sales as the company deploys its balance sheet in new project signings. The housing market is expected to be in an upcycle, particularly in the home market of Mumbai, the brokerage firm noted.

An upside scenario of 65% or target of Rs 1,500 could happen on faster-than-expected land monetisation, price appreciation and / or new project additions, Jefferies noted. Meanwhile, a downside of 6% or up to Rs 850 should delay project acquisitions, sharp rise in interest rates, or prolonged execution delays occur.

HDFC Securities: Buy | Target: Rs 1,295
HDFC Securities reiterates a 'buy' with an unchanged SOTP (Sum of the Parts) valuation of Rs 1,249.

Sharekhan: Buy | Upside: 22-24%
Sharekhan remains positive on the prospects of Macrotech Developers and expects 22-24% upside. "The stock has corrected by almost 20% over the trailing three months, providing a buying opportunity given its strong growth potential," Sharekhan added.

The company’s leadership position in Mumbai Metropolitan Region (MMR) and an eye on newer geographies such as Pune and Bengaluru are expected to sustain pre-sales growth.

A slowdown in real estate demand, especially in MMR and Pune, coupled with unfavourable macro-economic indicators such as any rise in interest rates can dampen demand.

ICICI Securities: Buy | Target: Rs 1,261
ICICI Securities retains a ‘buy’ rating with a revised target price of Rs 1,262 from an earlier target of Rs 1,275, based on FY23 NAV owing to balance sheet adjustments. Key risks are demand slowdown in the MMR market and rising interest rates, it said.

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