Mahindra Lifespace Surges As HDFC Securities Initiates Coverage With 'Buy'

Shares of Mahindra Lifespace Developers Ltd. gained the most in nearly two months after HDFC Securities initiated coverage with a 'buy' citing healthy project pipeline, strong balance sheet, and ability to leverage tailwinds.

The real estate and infrastructure development arm of the Mahindra Group, according to the brokerage, has an established track record, backed by a strong brand. The company's focus on timely execution and high saleability of projects adds to its allure, it said.

HDFC Securities has set a base-case target price of Rs 479 and a bull-case target of Rs 521 on the company. "Investors can buy the stock in the band of Rs 432-440 and add more on dips to Rs 391-398 band for a time horizon of three-four quarters," the brokerage said.

The company's minimal inventory, negligible debt—considering deferred land payments—makes it well placed to acquire new projects to ride the upcycle, HDFC Securities said.

"The company is likely to see bookings to the tune of Rs 1,800-2,000 crore in FY23 driven by the launches, new phases and balance inventory," HDFC Securities said in the note. "It has a diversified portfolio across regions that augurs well for business development," it said.

The company operates in residential developments under the ‘Mahindra Lifespaces’ and ‘Mahindra Happinest’ brands with its integrated cities and industrial clusters under the ‘Mahindra World City’ and ‘Origins by Mahindra World City’ brands.

HDFC Securities also listed the following concerns to its call:

• Risks and cyclicality inherent in the real estate sector: Scalability and realisation could impact residential business given the cyclical nature of the sector. In its commercial segment, total leasing of area much depends on the local demand and state policies.

• Delays in ongoing and planned projects: The company’s current and forthcoming projects may be subject to changes in terms of timelines, realisations, completions as a result of factors outside its control.

• Delays in monetisation of industrial parks: Any delay in sustained demand given global recessionary fears may impact monetisation potential of these land parcels.

• Inflationary pressures: Significant increases in prices or shortages of, or delay or disruption in supply of labour and key building materials could impact its profitability.

Shares of the company gained as much as 7.9% to Rs 479 apiece, before ending 6.4% higher on Wednesday. All five analysts tracking the company suggest a 'buy', according to Bloomberg data. The 12-month consensus price target implies an upside of 0.4%.