JM Financial has issued a ‘Buy’ rating for Macrotech Developers (Lodha) with a target price of ₹1,480, suggesting a 23% upside in the next 6-12 months. Macrotech, one of India’s largest real estate developers, continues to strengthen its leadership in the premium, mid-income, and affordable housing markets, while expanding into commercial and retail segments.
Key Investment Rationales
- Market Leadership with Proven Track Record: Lodha is the largest residential real estate developer in India based on cumulative residential sales value in key markets such as MMR (Mumbai Metropolitan Region) and Pune. The company has executed large township projects like Palava and Upper Thane, and continues to expand into segments like logistic parks and mixed-use developments.
- Robust Cash Flow Generation from Townships: Lodha’s ability to acquire land at competitive prices and develop large townships at Palava and Upper Thane has enabled it to generate high cash flows, with around 50% cash margins from paid-up land sales. This annuity-like cash flow model allows the company to de-leverage its balance sheet while continuing to develop large projects.
- Asset-Light Pre-Sales Growth: Lodha’s asset-light strategy has driven robust pre-sales growth with projects worth approximately ₹55,000 crore in gross development value. Around 54% of this value comes from markets where Lodha holds a strong position, driving its growth across regions.
Financial Summary (FY24A-FY26E)
- Revenue: ₹10,316 Cr (FY24A) to ₹13,546 Cr (FY26E)
- EBITDA: ₹2,675 Cr (FY24A) to ₹3,685 Cr (FY26E)
- EPS: ₹16.6 (FY24A) to ₹28 (FY26E)
- ROE: 11% (FY24A) to 13.1% (FY26E)
Key Risks
- Pre-Sales Slowdown: A prolonged slowdown in pre-sales or a delay in collections could impact Macrotech’s cash flow and growth.
- MMR Market Exposure: Lodha has significant exposure to the MMR market, which could pose a risk if there are adverse market conditions in that region.
Disclaimer: Investments in the stock market are subject to market risks. The views and recommendations provided in this article are based on analysis from JM Financial and do not constitute investment advice. Investors are advised to perform their own research and consult with financial advisors before making any investment decisions. Past performance is not indicative of future results, and the author and publication are not responsible for any losses incurred based on this information. Please read all scheme-related documents carefully before investing.
