HDFC Securities say buy this real-estate small cap stock to gain up to 22%

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Published: January 23, 2018 5:26:24 PM

In its latest report, HDFC Securities is bullish on the shares of a real estate development company from the Mahindra Group. The research firm has a target price of Rs 635 on the shares, implying an upside of more than 21% from the current market prices.

In its latest report, HDFC Securities is bullish on the shares of Mahindra Lifespace Developers, a real estate development company from the Mahindra Group. (Image: Reuters)

In its latest report, HDFC Securities is bullish on the shares of Mahindra Lifespace Developers, a real estate  development company from the Mahindra Group. The research firm notes that SEZ business is a long-term story. “Mahindra Lifespaces is developing two integrated business cities “Mahindra World City (MWC)”, i.e. one each in Chennai (~1,600 acres) and Jaipur (~3,000 acres) with a total area of ~4,600 acres on lines of work-live-plug-nplay infrastructure. These cities are meticulously planned and have been divided into zones for business and lifestyle. These comprise of Special Economic Zone (SEZ) and Domestic Tariff Area (DTA),” HDFC Securities noted in its report.

The research firm has a target price of Rs 635 on the shares, implying an upside of more than 21% from the current market prices. “We see 8% revenue cagr and 21% PAT cagr over the same period led by its Mahindra World Clusters at Jaipur and Chennai and higher sales from its residential units. Stock trades at ~14x FY20E earnings and 1.1x FY20 Book Value. Based upon ~1.4x Price/Book and ~18x FY20 earnings, we recommend Mahindra Life as BUY at cmp of Rs 491 and add on dips to Rs 444 with TP of Rs 635 over the next 4-6 quarters,” HDFC Securities noted in its report. 

The firm said that the real estate sector is also likely to get a big boost in the upcoming Union Budget 2018. “Proposals in the Union Budget are expected to stimulate capital expenditure and rural demand; and the step-up in government spend on physical infrastructure and housing is likely to benefit the real estate industry. In addition, policy breakthroughs such as Real Estate (Regulation and Development) Act (RERA) and structural reforms like the Goods and Services Tax (GST) should not only stimulate demand, but make the sector more efficient and organised,” the firm said.  

Track live stock prices: Mahindra Lifespace Developers

Commenting on the future prospects of the company, HDFC Securities observed, “Mahindra Lifespaces has strong balance sheet and has been able to raise capital at competitive terms even during challenging times. With its focus on execution, it has been successful in attracting equity participation in both residential and industrial projects, thereby increasing efficiency in the utilisation of its risk capital. As the economic environment improves further, company is well positioned to benefit from the opportunities.”

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