CLSA India Pvt. upgraded Macrotech Developers Ltd. to 'outperform' following the recent sharp correction in its stock prices while lowering the company's revenue estimate.
"We lowered our revenue recognition estimates marginally due to changes in the completion timelines of projects. We have also lowered our Ebitda margin estimates, to factor-in a relatively lower margin for its JDA projects versus its legacy-owned projects," the brokerage said.
However, CLSA estimates that Macrotech, which sells houses under the brand Lodha, will still reach significant scale over the next three years.
It upgraded the company's rating to 'outperform' from 'underperform,' due to a "sharp correction" in Lodha’s stock.
The company's pre-sales for fiscal 2023 reached Rs 12,000 crore, while net debt was at Rs 7,000 crore, slightly higher than the Rs 6,500 crore guidance. The company aims to reduce it to Rs 6,000 crore by FY24, according to the note.
While the company has set a guidance of Rs 14,500 crore of pre-sales in FY24, with a target CAGR of 20% over the next three years, CLSA estimates around 11% of growth due to its cautious view of the Mumbai housing market.
Macrotech Developers also set guidance for lower operating cash flow growth of 6% to Rs 6,000 crore due to capital expenditure spending and a lower proportion of sales from completed projects.
New Project Acquisitions
The real estate company aims to spend Rs 2,500 crore on acquisitions, in line with the expenditure of Rs 2,400 crore in FY23, according to the note.
It set targets to acquire projects with sales potential of more than Rs 17,500 crore, as against the Rs 19,800 crore target last year.
The real estate company also plans to launch 10 million square feet of new projects in FY24 and expects these projects to contribute 30% of its presales of Rs 4,400 crore in FY24 versus Rs 3,800 crore in FY23, the note said.
Shares of Macrotech Developers gained 0.68% to Rs 913.8 apiece, compared to a 0.23% rise in the benchmark Nifty 50 as of 11:45 a.m. on Tuesday.
Of the 17 analysts tracking the stock, 14 maintain a 'buy' rating and three suggest a 'hold,' according to Bloomberg data. The average 12-month consensus price target implies a potential upside of 33%.
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