Macrotech Developers surges 6% on heavy volumes; stock up 26% in 4 days

According to analysts, Macrotech Developers is expected to benefit from resilient housing demand, supply consolidation and peaking out of high interest rates.

Shares of Macrotech Developers surged 6 per cent to Rs 906.30 in Thursday's intra-day trade, amid heavy volumes. In comparison, the S&P BSE Sensex was down 0.55 per cent to 59,081 at 11:05 am.

In the past four trading days, the stock of real estate firm rallied 26 per cent. It had hit a 52-week low of Rs 711 on February 24, 2023. Despite of four days rally, in the past one month, Macrotech Developers has underperformed market as shares fell 12 per cent, as against 1.4 per cent decline the Sensex.

Macrotech Developers, which sells its properties under the Lodha brand, is one of the leading real estate firms in the country. The company is driven by passion of building world’s finest developments across its residential, commercial and digital infrastructure portfolio.

The company has delivered ~90 million square feet of real estate and is currently developing ~107 million square feet under its on-going and planned portfolio.

It has a major presence in Mumbai Metropolitan Region (MMR) and Pune property markets, while it recently made an entry into the Bengaluru market with a housing project.

According to analysts at Sharekhan, Macrotech Developers is expected to benefit from resilient housing demand, supply consolidation and peaking out of high interest rates.

Property registrations in Mumbai and Maharashtra remained resilient during January-February 2023 till date with a monthly average of 8,918 documents registered (similar monthly average for Q3FY2023) despite rise in interest rates (a 250 bps hike in SBI’s home loan rate during FY2023 till date), increase in property prices, and absence of concessions from state government.

"The company remains on track to exceed its pre-sales guidance for FY23, while it has already surpassed new project addition targets. It has a strong launch pipeline of 4.2msf (~Rs 5760 crore gross development value (GDV))) for Q4FY2023 (launched 6.7msf having Rs 11,040 crore GDV in 9MFY2023). A correction of more than 25 per cent in the stock price in little over one month provides favourable risk-reward ratio with FY2025E P/B multiple at 2.1x compared to historical average of 3.5x 1 year forward P/B multiple," the brokerage firm said.

The management believes that the housing segment will be the biggest beneficiary of increase in the country’s per capita income from $2,000 to $5,000 over the next decade, especially on the back of substantial growth in the middle class strata.

"Over medium term, the company is targeting a sales mix of 60-40 between outright and Joint Development Agreement (JDA). As per management, the initial investment in outright land stands at 20 per cent of GDV, while that in JDA amounts to 5-7 per cent of GDV. It expects to generate over Rs 5,000 crore of operating cash flows (post interest and tax) in FY24, which will be sufficient for project additions (investment required – Rs 2,000-Rs 3,000 crore), debt reduction and dividend payouts," Motilal Oswal Financial Services said.