Q2FY24 Review: Macrotech Developers: Strong tailwinds in H2FY24

31 Oct 2023 , 03:37 PM

Macrotech Developers (LODHA) reported strong performance across pre-sales and cashflows for Q2; overall H1FY24 performance has been in-line with guidance. H2FY24 will see significantly higher launch momentum, cashflows are also expected to be better with 80% of business development target achieved in H1. Land pricing at Palava has seen sharp uptick with latest transactions at Rs50mn/acre vs Rs25mn/acre during the IPO. Valuations are not inexpensive, stock trades at 38% premium to NAV, re-iterate ADD with TP of Rs825/share. 

H1FY24 in-line; H2 to fare better: 

LODHA reported pre-sales of Rs35.3 (+12% YoY), its highest quarterly sales. This was driven by launch of Rs24bn GDV in existing projects, although no new location launch happened during the quarter. H1FY24 pre-sales at Rs69bn are in-line with FY24 guidance of Rs145bn. LODHA reported P&L margins of 24%, and embedded ebitda margins of 30% (on pre-sales for Q2), despite ~35% of pre-sales coming from JDA projects. LODHA reported collections of Rs11bn (up 29% YoY), and healthy OCF margins of 52% to drive Rs5.3bn QoQ reduction in net debt to Rs67.3bn. 

Strong tailwinds across development and annuity verticals: 

Mgmt re-iterated strong outlook for H2FY24 driven by seasonality and launches (Rs120bn vs Rs39bn in H1). Land pricing has witnessed a sharp uptick in recent deals to Rs50mn/acre, 2x in last 2 years. The first launch in Bangalore is expected in 3QFY24, mgmt expects it to ramp up over next few years like Pune where it is expected to be among top 3 developers by end FY24. LODHA expects to clock in Rs2.5bn by FY24 end (largely from its commercial/retail assets under lease), which will ramp up to Rs5bn by FY26.

Retain estimates and ADD rating: 

LODHA has re-iterated its guidance over the next few years which entails: achieving >20% Cagr in pre-sales, >30% adjusted Ebitda margins, >20% RoE (on proforma earnings), dividend of 15-20% of net profit and net debt lower of 1x OCF or 0.5x equity. Retain ADD rating and TP of Rs825/share.