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Key result highlights
Revenue up 20% YoY, down 50%QoQ: Standalone revenues increased 19.9% YoY to INR815m and net profit grew
18% YoY to INR171m. A sharp QoQ drop (~50%) in revenue is largely due to lower new launches over the past couple
of quarters, which resulted in muted incremental recognition. MLIFE's consolidated revenue was INR1b, up 26% YoY
against INR0.8b in 1QFY11 and consolidated net profit grew 14% YoY to INR142m against INR125m in 1QFY11.
Change in revenue mix leads margin contraction: In 1QFY12 MLIFE's standalone EBITDA grew 6% YoY to
INR172m and EBITDA margin was 21.2% (against 24.6% in 4QFY11). The drop in EBITDA margin was attributable
mainly to declining revenue contribution from almost completed Mumbai projects and the revenue mix being skewed
towards lower margin non-Mumbai projects in the NCR and Pune.
Muted new launches amid strong absorption: 1QFY12 has been the second consecutive quarter of muted new
launches. The company launched only one project, Aura Phase 3 (~0.2msf) in the NCR at a sale rate of INR4,000/
square foot (25% higher than INR3,175/square foot in Aura Phase 2). Despite a sharp upward revision in price, the
project had ~85% absorption. The company also soft-launched Royal Ivy (GE Garden, Mumbai) at ~INR10,000/
square foot in June 2011.
Sales volume up 126% YoY, value up 87% YoY: In 1QFY12 MLIFE sold ~0.34msf (INR1.7b) against 0.15msf
(INR0.9b) in 1QFY11. The sales volume includes ~0.16msf in Aura Phase 3 and 0.05msf in Mumbai projects.
The stock trades at a ~34% discount to our SOTP value of INR564, 10.9x FY12E EPS of INR33.7 and 7.6x FY13E
EPS of INR48.9. Maintain Buy.
Strong sales in ongoing projects lead to low inventory; ramp-up of new
launches essential
About 70% of MLIFE's ongoing residential projects have been sold. The company
sold ~2.2msf out of its ongoing projects of 3.2msf in key cities such as Mumbai, Pune,
NCR and Chennai.
While the company has depicted a strong ramp-up in annual sales run-rate to ~850units
(FY10-11) against ~200units (FY07-09) on the backdrop of several new launches
across locations, the momentum in launches has declined over past six months with
only two new launches of ~0.4msf in Chennai (Iris Court, part of consolidated revenue)
and Gurgaon (Aura Phase 3).
A low number of launches and steady absorption resulted in low unsold inventory of
only 0.5msf at its projects, ~90% of which are in Chennai. Therefore, traction in new
launches in other geographies will play a critical role in maintaining sales run-rate.
MLIFE plans to launch 7-8 projects in various locations, which includes later phases
of developments in Pune, NCR and Chennai and new projects in Ghatkopar (Mumbai),
Hyderabad and Nagpur.
Ongoing SEZs progress well
MLIFE has two key ongoing SEZ projects in Chennai and Jaipur. While Chennai SEZ is in
an advanced stage of monetization with a focus on selling residential and institutional
areas, and the Jaipur SEZ is in the early stage of monetization with the sale of the processing
area underway.
MWC Chennai: Residential sales steady; adds one more customer in 1QFY12
MLIFE sold ~0.13msf in 1QFY12 (against ~0.6msf in FY11) in six projects.
The number of commercial customers in its processing area was 58 (30 in SEZ and 28
in DTA) with 37 operational, implying a new customer addition and two new operation
commencements in 1QFY12.
Holiday Inn Express is set to operate a business hotel in Mahindra World City, Chennai.
MWC Jaipur: Two more clients start operation; aims at traction in leasing
The first unit in the manufacturing zone, KnitPro International, started operations at
Mahindra World City (MWC), Japiur. With this, MWC is moving towards becoming
the first operation light engineering/auto/auto component SEZ in North India.
Total leasing in processing area was 340 acres, with additional MoUs for 62 acres.
The client base is 34 customers with five operational (including Infosys, Deutsche
Bank KPO, EXL and KnitPro International) and eight are under construction (including
ICICI Bank and SBI in the DTA zone).
The management is looking to steady traction in leasing and aims to monetize a
significant portion of notified portion of SEZ over FY12. While MWC, Jaipur has
applied for multiproduct status for its SEZ, progress in approval process has been
slow. Nonetheless, the management expects strong demand across each segment to
mitigate the impact of the delay.
Commencement of north Chennai SEZ may be a trigger
MLIFE has four more SEZ projects aggregating ~6,500 acres in various stages of
land acquisition. The management said MLIFE acquired ~400 acres in North Chennai
(target 1,000 acres) and 300 acres in Pune (target 2,000 acres).
It expects to start activities in the Chennai SEZ by the end of FY12 or early FY13,
which could be a key trigger for MLIFE, since our current estimate doesn't value its
upcoming SEZ projects. However, clarity on the time-line for the Pune SEZ has yet to
emerge. There has been no progress on recent MoUs with government of Gujarat for
two more SEZs, which are likely to take 2-3 years for land acquisition.
Valuation and view
MLIFE has a strong focus on two business verticals, the Residential and SEZ. Its (a)
strong brand equity, (b) established client relationships and (c) a strong balance sheet
(net DER(x) of 0.3x) offer a robust growth outlook in both verticals. With the potential
acquisition of four more integrated development projects, we believe MLIFE is set to
augment the scalability of its business significantly.
Our FY12 SOTP value for MLL is INR564/share: (1) Chennai SEZ at INR126/share,
(2) Jaipur SEZ at INR170/share, (3) the residential vertical at INR181/share and (4)
other rental assets at INR60/share. Our valuations do not include its pipeline SEZs in
(a) North Chennai, (b) near the Mumbai-Pune Expressway and (c) new MoUs at
Dholera Special Investment Region.
The stock trades at a ~34% discount to our SOTP value of INR564, 10.9x FY12E
EPS of INR33.7 and 7.6x FY13E EPS of INR48.9. Maintain Buy.
Company description
Mahindra Lifespaces (MLIFE) was constituted by the
merger of Great Eastern Shipping Company Limited
(GESCO) and Mahindra Realty & Infrastructure
Developers Limited (MRIDL). MLIFE is a leading real
estate development company in India, focused on residential
projects and integrated infrastructure development in SEZs.
It has till date developed over 6msf of premium residential
and commercial space excluding SEZs.
Key investment arguments
Having pioneered development of SEZs in the private
sector, MLIFE enjoys the first mover advantage. It has
a healthy balance sheet, with low leverage and no major
outstandings or debtors.
MLIFE's multi-product SEZ in Chennai is the first
successful operational private sector SEZ in India. The
management is in advanced stages of acquiring
additional ~300 acres of land at the Chennai SEZ.
Of the total area of 3,000 acres at the Jaipur SEZ,
~2,700 acres have been acquired. Almost 400 acres of
the processing area at Jaipur SEZ has been leased out.
Key investment risks
Land aggregation solely by developers is a daunting
task. Land acquisition constraints, clarity on tax
incentives remain as key hurdles for SEZs.
Any weaker-than-expected growth for the economy
could negatively impact demand, which could affect
our sales and earnings estimates for MLL.
Recent developments
In 1QFY12 MLIFE sold ~0.34msf (INR1.7b) against
0.15msf (INR0.9b) in 1QFY11. The sales volume
includes ~0.16msf in Aura Phase 3 and 0.05msf in
Mumbai projects
It expects to start activities in the Chennai SEZ by the
end of FY12 or early FY13, which could be a key trigger
for MLIFE
Valuation and view
The stock trades at a ~34% discount to our SOTP value
of INR564, 10.9x FY12E EPS of INR33.7 and 7.6x
FY13E EPS of INR48.9. Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key result highlights
Revenue up 20% YoY, down 50%QoQ: Standalone revenues increased 19.9% YoY to INR815m and net profit grew
18% YoY to INR171m. A sharp QoQ drop (~50%) in revenue is largely due to lower new launches over the past couple
of quarters, which resulted in muted incremental recognition. MLIFE's consolidated revenue was INR1b, up 26% YoY
against INR0.8b in 1QFY11 and consolidated net profit grew 14% YoY to INR142m against INR125m in 1QFY11.
Change in revenue mix leads margin contraction: In 1QFY12 MLIFE's standalone EBITDA grew 6% YoY to
INR172m and EBITDA margin was 21.2% (against 24.6% in 4QFY11). The drop in EBITDA margin was attributable
mainly to declining revenue contribution from almost completed Mumbai projects and the revenue mix being skewed
towards lower margin non-Mumbai projects in the NCR and Pune.
Muted new launches amid strong absorption: 1QFY12 has been the second consecutive quarter of muted new
launches. The company launched only one project, Aura Phase 3 (~0.2msf) in the NCR at a sale rate of INR4,000/
square foot (25% higher than INR3,175/square foot in Aura Phase 2). Despite a sharp upward revision in price, the
project had ~85% absorption. The company also soft-launched Royal Ivy (GE Garden, Mumbai) at ~INR10,000/
square foot in June 2011.
Sales volume up 126% YoY, value up 87% YoY: In 1QFY12 MLIFE sold ~0.34msf (INR1.7b) against 0.15msf
(INR0.9b) in 1QFY11. The sales volume includes ~0.16msf in Aura Phase 3 and 0.05msf in Mumbai projects.
The stock trades at a ~34% discount to our SOTP value of INR564, 10.9x FY12E EPS of INR33.7 and 7.6x FY13E
EPS of INR48.9. Maintain Buy.
Strong sales in ongoing projects lead to low inventory; ramp-up of new
launches essential
About 70% of MLIFE's ongoing residential projects have been sold. The company
sold ~2.2msf out of its ongoing projects of 3.2msf in key cities such as Mumbai, Pune,
NCR and Chennai.
While the company has depicted a strong ramp-up in annual sales run-rate to ~850units
(FY10-11) against ~200units (FY07-09) on the backdrop of several new launches
across locations, the momentum in launches has declined over past six months with
only two new launches of ~0.4msf in Chennai (Iris Court, part of consolidated revenue)
and Gurgaon (Aura Phase 3).
A low number of launches and steady absorption resulted in low unsold inventory of
only 0.5msf at its projects, ~90% of which are in Chennai. Therefore, traction in new
launches in other geographies will play a critical role in maintaining sales run-rate.
MLIFE plans to launch 7-8 projects in various locations, which includes later phases
of developments in Pune, NCR and Chennai and new projects in Ghatkopar (Mumbai),
Hyderabad and Nagpur.
Ongoing SEZs progress well
MLIFE has two key ongoing SEZ projects in Chennai and Jaipur. While Chennai SEZ is in
an advanced stage of monetization with a focus on selling residential and institutional
areas, and the Jaipur SEZ is in the early stage of monetization with the sale of the processing
area underway.
MWC Chennai: Residential sales steady; adds one more customer in 1QFY12
MLIFE sold ~0.13msf in 1QFY12 (against ~0.6msf in FY11) in six projects.
The number of commercial customers in its processing area was 58 (30 in SEZ and 28
in DTA) with 37 operational, implying a new customer addition and two new operation
commencements in 1QFY12.
Holiday Inn Express is set to operate a business hotel in Mahindra World City, Chennai.
MWC Jaipur: Two more clients start operation; aims at traction in leasing
The first unit in the manufacturing zone, KnitPro International, started operations at
Mahindra World City (MWC), Japiur. With this, MWC is moving towards becoming
the first operation light engineering/auto/auto component SEZ in North India.
Total leasing in processing area was 340 acres, with additional MoUs for 62 acres.
The client base is 34 customers with five operational (including Infosys, Deutsche
Bank KPO, EXL and KnitPro International) and eight are under construction (including
ICICI Bank and SBI in the DTA zone).
The management is looking to steady traction in leasing and aims to monetize a
significant portion of notified portion of SEZ over FY12. While MWC, Jaipur has
applied for multiproduct status for its SEZ, progress in approval process has been
slow. Nonetheless, the management expects strong demand across each segment to
mitigate the impact of the delay.
Commencement of north Chennai SEZ may be a trigger
MLIFE has four more SEZ projects aggregating ~6,500 acres in various stages of
land acquisition. The management said MLIFE acquired ~400 acres in North Chennai
(target 1,000 acres) and 300 acres in Pune (target 2,000 acres).
It expects to start activities in the Chennai SEZ by the end of FY12 or early FY13,
which could be a key trigger for MLIFE, since our current estimate doesn't value its
upcoming SEZ projects. However, clarity on the time-line for the Pune SEZ has yet to
emerge. There has been no progress on recent MoUs with government of Gujarat for
two more SEZs, which are likely to take 2-3 years for land acquisition.
Valuation and view
MLIFE has a strong focus on two business verticals, the Residential and SEZ. Its (a)
strong brand equity, (b) established client relationships and (c) a strong balance sheet
(net DER(x) of 0.3x) offer a robust growth outlook in both verticals. With the potential
acquisition of four more integrated development projects, we believe MLIFE is set to
augment the scalability of its business significantly.
Our FY12 SOTP value for MLL is INR564/share: (1) Chennai SEZ at INR126/share,
(2) Jaipur SEZ at INR170/share, (3) the residential vertical at INR181/share and (4)
other rental assets at INR60/share. Our valuations do not include its pipeline SEZs in
(a) North Chennai, (b) near the Mumbai-Pune Expressway and (c) new MoUs at
Dholera Special Investment Region.
The stock trades at a ~34% discount to our SOTP value of INR564, 10.9x FY12E
EPS of INR33.7 and 7.6x FY13E EPS of INR48.9. Maintain Buy.
Company description
Mahindra Lifespaces (MLIFE) was constituted by the
merger of Great Eastern Shipping Company Limited
(GESCO) and Mahindra Realty & Infrastructure
Developers Limited (MRIDL). MLIFE is a leading real
estate development company in India, focused on residential
projects and integrated infrastructure development in SEZs.
It has till date developed over 6msf of premium residential
and commercial space excluding SEZs.
Key investment arguments
Having pioneered development of SEZs in the private
sector, MLIFE enjoys the first mover advantage. It has
a healthy balance sheet, with low leverage and no major
outstandings or debtors.
MLIFE's multi-product SEZ in Chennai is the first
successful operational private sector SEZ in India. The
management is in advanced stages of acquiring
additional ~300 acres of land at the Chennai SEZ.
Of the total area of 3,000 acres at the Jaipur SEZ,
~2,700 acres have been acquired. Almost 400 acres of
the processing area at Jaipur SEZ has been leased out.
Key investment risks
Land aggregation solely by developers is a daunting
task. Land acquisition constraints, clarity on tax
incentives remain as key hurdles for SEZs.
Any weaker-than-expected growth for the economy
could negatively impact demand, which could affect
our sales and earnings estimates for MLL.
Recent developments
In 1QFY12 MLIFE sold ~0.34msf (INR1.7b) against
0.15msf (INR0.9b) in 1QFY11. The sales volume
includes ~0.16msf in Aura Phase 3 and 0.05msf in
Mumbai projects
It expects to start activities in the Chennai SEZ by the
end of FY12 or early FY13, which could be a key trigger
for MLIFE
Valuation and view
The stock trades at a ~34% discount to our SOTP value
of INR564, 10.9x FY12E EPS of INR33.7 and 7.6x
FY13E EPS of INR48.9. Maintain Buy.
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