Q3FY24 Review: Macrotech Developers: Steady quarter and outlook

30 Jan 2024 , 08:51 PM

Macrotech Developers (LODHA) reported a strong and steady performance, with M9FY24 pre-sales tracking in line with full-year guidance. LODHA’s maiden launch in Bangalore received a strong response. Operating cashflows for the quarter were healthy, which kept the net debt broadly stable despite a meaningful rise in growth investments. Sustained increase in land pricing with infrastructure development at Palava, will aid future cashflows and NAV. LODHA’s P&L will improve steadily, as it transitions from the completed method to POCM; helping achieve its >20% RoE guidance. Retain ADD rating. 

Pre-sales in line with guidance: 

LODHA reported residential pre-sales of Rs34.1bn — up 12% YoY — and its highest-ever Q3 sales performance. For M9FY24, LODHA’s pre-sales at 103bn are up 14% YoY; tracking in-line with full year FY24 guidance of Rs145bn. This was driven by steady sales across most markets, and launches of ~3msf in Q3; including LODHA’s maiden project in Bangalore that was ~80% sold-out at launch. LODHA reported strong P&L recognition in Q3 and margins of 30%, and in line with the embedded Ebitda margins of 30% (on pre-sales for M9).

Strong business development, net debt stable: 

LODHA reported collections of ~Rs26bn (up 5% YoY), and healthy OCF margins of 50%. Net debt was higher marginally by Rs200mn QoQ to Rs67.5bn. LODHA invested Rs13.2bn in growth investments, meaningfully higher than the quarterly average levels of Rs5-6bn. LODHA has added 2msf/Rs60bn of business development in Q3. For M9FY24, the company has clocked in 10msf/203bn — higher than the full-year guidance of >Rs175bn. Mgmt has passed an enabling resolution to raise up to Rs50bn for growth opportunities beyond the pre-sales 20% cagr. 

Township business seeing tailwinds; retain ADD: 

Mgmt shared that Palava will benefit from infra projects planned over the next five years; is also likely to aid LODHA’s land sale/warehousing business. LODHA aims to achieve Rs15bn from annuity by FY30 from office/retail, warehousing and facility mgmt. On a consolidated basis, it plans to achieve >20% Cagr in pre-sales, >30% adjusted Ebitda, >20% RoE, dividend of 15-20% of net profit and net debt lower of 1x OCF or 0.5x equity. Retain ADD.