Motilal Oswal Financial Services initiated coverage on Sri Lotus Developers with a ‘Buy’ rating, with a target price of Rs 250. This implies an upside potential of up to 35% from current levels. The strong sales growth over the next three years, along with focused niche market led to the coverage. The share price of Sri Lotus Developers rallied over 8% to an intra-day high of Rs 200.69 on the National Stock Echange post the coverage initiation.
Motilal Oswal on Sri Lotus Developers: Strong growth visibility
Motilal Oswal expects Sri Lotus Developers to clock a presales CAGR of 129% over FY25-28, driven by its robust project pipeline. The company’s collections are also likely to show similar growth, expected to reach Rs 4,020 crore by FY28. This strong financial trajectory is expected to generate cumulative operating cash flows of Rs 6,900 crore by FY32, with the company projecting best-in-class margins.
Motilal Oswal on Sri Lotus Developers: Focus on premium markets
The real estate firm has established itself as a key player in the society redevelopment space. It has distinguished itself by focusing exclusively on premium micro-markets in Mumbai’s most exclusive neighbourhoods. This specialisation is a niche play in the luxury redevelopment space. The company’s portfolio includes projects in prestigious, high-profile locations such as Juhu, Bandra, Worli, and Nepean Sea Road, catering primarily to the city’s elite.
This focus positions the company well to benefit from the rising demand for premium and luxury housing in the MMR (Mumbai Metropolitan Region) region.
Motilal Oswal on Sri Lotus Developers: Zero debt status
Sri Lotus Developers’ management adheres to the belief that a debt-free developer leads to a stress-free customer. The company’s zero debt and litigation-free status have become key differentiators, enhancing project acquisition alongside top-notch execution. Motilal Oswal said that this financial strength, coupled with strong profitability visibility, ensures the company is expected to remain net cash positive.
Furthermore, the brokerage expects Return on Equity (RoE) and Return on Capital Employed (RoCE) to remain above 26% by FY28.
Motilal Oswal on Sri Lotus Developers: Asset-light business model
The company leverages its deep understanding of the land-starved MMR market. The company plans to grow using an asset-light model primarily through Joint Developments (JD), Joint Ventures (JV), or society redevelopment. This strategy allows for rapid scaling with minimal capital deployment compared to outright land purchases. Currently, Sri Lotus Developers’ almost 89% of the projects are executing under the redevelopment model.