Q4FY23 Review: Macrotech Developers: Steady performance

25 Apr 2023 , 11:13 AM

Macrotech Developers (LODHA) reported in-line Q4 operating performance. For FY23, pre-sales were ahead of estimates, however net debt reduction (of Rs22bn) fell short of the initial guidance (>Rs33bn). While steep rise in mortgage rates has marred the demand for entry-level affordable housing, LODHA continues to witness strong customer walk-ins and conversions across all its projects. Mgmt expects to deliver 20%+ Cagr in pre-sales over medium term, with continued focus on net debt reduction.

Operationally in-line quarter

At Rs30.3bn, pre-sales for Q4 was down 12% YoY/ flat QoQ; FY23 pre-sales of Rs121bn (guidance of Rs115bn) was up 33% YoY. Operating cashflows (OCF) at Rs16.1bn were the highest-ever since listing; margins came in at ~55%. FY23 OCF came in at Rs55bn (~55% margins), marginally below the Rs60bn guided by LODHA. At Rs22bn, FY23 net debt reduction was also lower, against the initial guidance of >Rs33bn reduction – partly driven by higher business development spends of Rs23bn. In the P&L, Q4 revenue recognition was strong, driven by 3.4msf of completions; FY23 revenues were up 2.5% YoY, Ebitda margins were largely flat YoY at 22%.

No signs of slowdown in demand

On the concall, mgmt shared that demand continues to remain robust, with FY23 registering the highest-ever walk-ins and conversions further aided by ~8% price increase across the portfolio. Post-Covid, the Affordable segment demand has moved from 1BHK to 2BHK, and Aspirational has moved up from 2BHK to 3BHK. Mgmt expects the Township business (Palava and Upper Thane) to outperform other segments. Further, the Digital infra business is expected to mature over next 2-3 years. It is also targeting Rs5bn p.a. of annuity income by FY26 and Rs15bn by FY30, from rentals and Facility Mgmt business.

FY24 guidance befitting healthy outlook

LODHA expects FY24 pre-sales of Rs145bn with ~20% contribution from Pune and Bangalore. LODHA is expected to achieve net debt of <1x OCF within FY24, despite a muted 6% YoY OCF growth guidance. Over the medium term, it continues to guide for 20% pre-sales Cagr, 20% RoE, 15-20% of PAT as dividend. Aggressive business development through JDA model will continue in FY24 as well. Analysts of IIFL Securities maintain BUY with Rs 1,220/share target price.