Macrotech Developers (Lodha) clocked pre-sales of ~Rs 28.1 bn in Q1FY23 (up 194% y-o-y, but down 19% q-o-q) —its best-ever for any Apr-Jun quarter. The company maintained the ~Rs 115-bn pre-sales guidance for FY23 (~Rs 90 bn in FY22). Collections shot up by 53% y-o-y (down 8% q-o-q). Net debt for the India business dipped to ~Rs 89 bn (~Rs 93 bn in FY22). It also added three JDA projects with GDV of ~Rs 62 bn (FY23 target of Rs 150 bn) and entered the Bengaluru market in Q1FY23. With the housing cycle likely turning, we expect the sales momentum to stay healthy going ahead. Maintain ‘Buy’ with a TP of Rs 1,392.
Sales momentum improves: New sales healthy performance came despite Q1 being seasonally weak due to the vacation period and onset of monsoon, and in spite of the stamp duty increasing by 1% w.e.f. April 1, 2022. The company would have to notch up sales of ~Rs 87 bn in 9MFY23 to achieve its guidance – growth of just ~8% y-o-y. It has already achieved 75% of the incremental sales growth required to meet FY23 guidance.
Business development continues: The firm added three new JDA projects (across the MMR, Pune and Bengaluru) spanning ~5.1msf with a GDV of ~Rs 62 bn to its project portfolio during the quarter.
Outlook and valuation: Well-placed for growth: As highlighted earlier, RERA-driven consolidation is throwing up growth opportunities for organised players such as Lodha. Revival in housing demand, Lodha’s leadership position in the MMR, which is registering healthy sales, robust business development performance and ready inventory liquidation are likely to culminate in robust cash flows. Faster land monetisation at Palava, portfolio growth, geographical diversification and annuity asset sale can be potential stock catalysts. We maintain ‘BUY/SN’ with a TP of Rs 1,392 (on a par with Sep-23E based NAV of Rs 1,392).