Mahindra Life Space: Better-than-expected 2QFY11. ADD :: Kotak Sec,

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Mahindra Life Space Developer (MLIFE)
Property
Better-than-expected 2QFY11. MLIFE reported strong growth in standalone revenues
of Rs890 mn (+40% yoy) along with a 300 bps expansion in EBITDA margins yoy.
Key positives were project sales of Rs2.6 bn and further signs of progress in land bank
addition (MLIFE has purchased land in Mumbai for a total developable area of 375,000
sq. ft). However, progress in Mahindra World Cities in Jaipur and Chennai remained
muted. We retain our ADD recommendation with a target price of Rs546 share.


2QFY11 results – marginally better than expected
MLIFE reported revenues of Rs890 mn (+40% yoy, +31% qoq, 11% above estimate) and EBITDA
of Rs234 mn (+59% yoy, +44% qoq, 11% above estimate) with EBITDA margin of 26.2%, in line
with our estimate and up 300 bps yoy. Higher-than-expected EBITDA margins and other income
(Rs114 mn versus expected Rs63 mn) led to PAT being 24% above estimate at Rs247 mn (+42%
yoy, and +70% qoq).

Sales and launches remain robust
In 2QFY11, MLIFE has launched (1) the final phase of its residential project Eminente at Goregaon
in Mumbai and (2) the 2nd phase of its residential project, Aura, at Gurgaon. We note that MLIFE
(along with subsidiaries) has achieved project sales (not revenue booking) of Rs2.6 bn in 2QFY11
versus Rs1.2 bn in 2QFY10 taking the total sales for 1HFY11 to Rs3.5 bn, which is up 129% yoy.
We highlight that sale pick-up in projects under construction directly get booked to the extent of
completion based on the percentage of completion accounting.

Modest accretion to development pipeline
After acquiring land in Pune and signing a JDA in Hyderabad in 1QFY11, MLIFE has purchased two
relatively small land parcels in Mumbai in 2QFY11 – (1) Kandivali, Mumbai with a development
potential of 150,000 sq. ft and (2) Ghatkopar with a development potential of 225,000 sq. ft.
We have not factored these in our projections as we would await more clarity regarding launch
timelines, location, price and agreement terms.