QIP fund raise lowers debt; firm likely to meet India biz guidance; retained with revised TP of Rs 1,304.
Macrotech Developers (LODHA) achieved Q3FY22 India business sales bookings of Rs 26.1 bn vs. Isec estimate of Rs 23.9 bn (up 40% y-o-y and 30% q-o-q) as the sales momentum seen in Q2FY22 continued into the festive season in Oct-Nov’21. The company has achieved 9MFY22 sales bookings of Rs 55.7 bn in its India business and we believe that it is on track to achieve its FY22 sales guidance of Rs 90 bn (Isec estimate at `87.7 bn). Further, the company signed six new JDA signings in Q3FY22 having GDV of Rs 100 bn and the recent QIP issuance of Rs 40 bn has resulted in India business net debt reducing to Rs 99.3 bn.
We retain our Add rating with a revised TP of Rs 1,304/share (earlier `1,129) incorporating Nov’21 QIP issue of Rs 40 bn and valuing the company at a 30% premium to our Mar’22 NAV of Rs 1,003/share considering value accretion from new JDA signings in Q3FY22. Key risks are a demand slowdown in the MMR market and rising interest rates in India.
Q3FY22 sees strong QoQ improvement in sales bookings: In Q3FY22, the company has done two launches in MMR – new phase at Premier Compound in Palava Phase 2, MMR and Woods, Kandivali, MMR. India business collections of Rs 21.3 bn were up 44% y-o-y and 11% q-o-q. Another positive was the company achieving Q3FY22 sales bookings of GBP191 mn or Rs 19 bn in its London projects during the quarter.
QIP fund raise brings down India debt: The company’s India business net debt reduced by Rs 25.5 bn q-o-q to Rs 99.3 bn in Dec’21 from Rs 125 bn in Sep’21 aided by the QIP issuance of Rs 40 bn in Nov’21. With the company having added another six new projects through the JDA route in Q3FY22, we believe that payments to land owners may have been partially funded through QIP proceeds.
On track to achieve FY22E India business sales guidance of Rs 90 bn: The company has achieved 9MFY22 sales bookings of Rs 55.7 bn in its India business and we believe that it is on track to achieve its FY22 sales guidance of Rs 90 bn. While this implies Q4FY22 sales bookings of over `30 bn, we believe that continued momentum in residential sales and logistics/warehousing vertical may enable the company to achieve its guidance. Any adverse impact from a third Covid wave is the key risk to achieving the guidance.
Valuations: We retain our Add rating with a revised TP of Rs 1,304/share (earlier Rs 1,129) incorporating Nov’21 QIP issue of Rs 40 bn. Our GAV of Rs 565 bn includes Rs 344 bn for FY23-30E post-tax-FCFF, Rs 201 bn for company’s land acres and Rs 20 bn from UK project surplus. Adjusted for FY22E India net debt of Rs 83 bn, we arrive at our NAV of Rs 483 bn or Rs 1,003/share.
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