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Mahindra Lifespace Developers 3QFY2014 performance highlights and results update

January 27, 2014, Monday, 05:35 GMT | 00:35 EST | 10:05 IST | 12:35 SGT
Contributed by Angel Broking


Mahindra Lifespace Developers (MLIFE) reported a mixed set of numbers with profitability coming in line with the consensus estimate. Its standalone revenue reported a decline of 6.3% yoy to Rs.58cr in 3QFY2014, which is lower than the consensus estimate of Rs.93cr. The standalone EBITDA decreased by 75% yoy to Rs.2cr, owing to lower-than-expected revenue recognition and increase in staff cost (up 17% yoy) during the quarter. On the earnings front, the company reported a PAT of Rs.17cr (consensus estimate was of Rs.16.4cr), indicating a growth of 22.9% yoy. This was mainly on account of (a) higher other income and (b) reassessment of effective tax rate during the quarter. On a consolidated level, MLIFE reported a revenue of Rs.143.7cr and PAT of Rs.29.3cr, suggesting a profit for its subsidiaries at the net level. We recommend a Buy rating on the stock.
 
New launches to drive sales growth: During the quarter the company launched three projects- a residential project Nova at MWC (Chennai), Phase IV at Ashvita (Hyderabad) and Phase IIC at Bloomdale (Nagpur). The company has already sold 113 units in the first 40 days of the launch at project Nova in Chennai. In 3QFY2014, the company sold 0.31msf (new sales) in its real estate business for a total transaction value of Rs.131cr, implying a realization of ~Rs.4,226/sqft. Going forward, we expect strong sales numbers along with improving realizations in the coming quarters on the back of sharp pick up in approvals and new launches anticipated in the current financial year.
 
Outlook and valuation: We remain positive on MLIFE given its diversified geographic exposure in terms of ongoing and forthcoming real estate projects. We expect strong sales numbers over the coming quarters, following new project launches in Pune, Chennai and Mumbai, along with robust execution. The stock is currently trading at a P/BV of 1.1x and 1.0x our FY2014 and FY2015 estimates respectively. We value MLIFE on a SOTP basis and slightly adjust our NAV to Rs.531/share, and apply a 10% discount to our SOTP value to arrive at a target price of Rs.478, suggesting a 23% upside from the current levels. We continue to maintain our Buy rating on the stock.