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Launches affordable housing projects…
• Mahindra Lifespace Developers’ (MLDL) standalone net profit grew
52.4% YoY to | 39.9 crore and was largely ahead of our expectation
of | 26.3 crore mainly due to higher other income of | 47.4 crore
• At the consolidated level, while, topline de-grew 7.4% YoY to | 181.6
crore, the net profit grew 23.5% YoY to | 23.5 crore due to reduction
in the interest expenses (| 8.8 crore in Q2 FY15 vs. | 15.8 crore in Q2
FY14) as MLDL’s consolidated debt came down to | 1216 crore in Q2
FY15 vs. | 1397.6 crore
• In terms of sales volume in the residential segment, the company
sold 233 units (0.23 million sq ft) vs. 113 units (0.16 million sq ft) in
Q2FY14 across all projects worth | 93 crore as launch of “Happinest”
Avadi project in affordable segment in Chennai alone contributed 100
units in Q2 FY15
Launched pilot affordable projects; adds land in Andheri on JD basis…
MLDL launched two pilot affordable housing project in Chennai (0.34 mn
sq ft) & Boisar (0.5 mn sq ft) in the last two months where it is targeting
100 units each per month. Additionally, MLDL has acquired a land parcel
in Andheri (E) on a joint development model, which has development
potential of 0.33 mn sq ft. Launches of affordable housing & forthcoming
launches of 5.2 mn sq ft over the next 12-18 months provide strong
visibility over sales volumes. This coupled with better sales from MWC
Chennai and Jaipur lends us the comfort that MLDL’s topline and
bottomline will grow at 29.9% & 27.2% CAGR, respectively, in FY14-16E.
Balancing SEZ play with different maturity portfolio…
MLDL is the first private player in the SEZ space that demonstrated its
capabilities by providing world class infrastructure at the Chennai SEZ
(~1550 acres). Enhancing its learning curve, MLDL is leveraging its
expertise on Jaipur SEZ (~3000 acres) and North Chennai SEZ (~750
acres). We also like MLDL’s strategy to balance out its SEZ portfolio with
different maturity, which will not strain its balance sheet. Furthermore,
early acquisition of large tracts of land in Jaipur and North Chennai will
hugely benefit MLDL’s SEZ business as new players in the SEZ space will
have to incur higher land acquisition cost under LARR bill.
Reduced leverage & strong Parentage also lends us the comfort
MLDL consolidated net debt to equity has come down from 1.1x in FY14
to 0.7x in H1 FY15 with sale of Byculla land. Furthermore, we also derive
our comfort in MLDL due to its strong parentage advantage. MLDL is
promoted by the Mahindra Group, which has a diversified presence
across business. The group has exhibited a strong track record of being
the top players across business verticals. The strong management lends
us the comfort that MLD to emerge as dominant player in real estate
space as well.
Attractive valuation with strong parentage; maintain BUY…
Considering the parentage advantage and ramp up in the project portfolio
led by recent land acquisition, we believe current valuations (at 0.6x
potential NAV & 1.3x FY16 P/BV) are attractive. We maintain our BUY
recommendation with a target price of | 700 (0.8x its potential NAV).

LINK
http://content.icicidirect.com/mailimages/IDirect_MahindraLifespace_Q2FY15.pdf