Macrotech Developers Q3 earnings robust; should you buy, hold or sell?

Macrotech Developers, which operates under the Lodha brand name, reported stellar growth for the quarter ended December 2023 with best-ever pre-sales numbers. The real estate developer’s net profit jumped 24.4 percent on-year to Rs 503.3 crore, and revenue soared 65.2 percent YoY to Rs 2,930.6 crore, its highest ever.

Analysts remain bullish on the stock. With the housing cycle turning, they expect Macrotech’s sales momentum to remain healthy.

Macrotech’s solid topline and bottomline growth also gave a boost to the company’s operating margin, which expanded to 30.1 percent in the December quarter. Going forward, pre-sales and cash flow trajectory would be the key triggers for the Macrotech Developers stock, said Nuvama Institutional Equities.

At 10:07 am, Macrotech Developers shares were trading marginally higher at Rs 1,037.45 on the National Stock Exchange (NSE). In the last one year, the stock has surged over 100 percent, doubling investors’ money. In comparison, benchmark Nifty 50 has risen around 23 percent during this period.

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Outlook

According to analysts at Motilal Oswal, Macrotech has been delivering a steady performance across its key parameters of pre-sales, cash flows, business development, profitability, and return ratios over the last two years. “As it prepares itself to capitalize on the strong growth and consolidation opportunities, we expect this consistency in operational performance to continue,” the brokerage said.

The revival in housing demand, Lodha’s leadership in the Mumbai Metropolitan Region (MMR) and strong execution skills, industry consolidation, the company’s promising start to asset-light business development through the Joint Development Agreement (JDA) mode, ready inventory liquidation and interest cost reduction are likely to culminate in robust cash flows and debt reduction going ahead, according to Nuvama Institutional Equities.

Stock Call: Should you buy, hold or sell Macrotech shares?

“We believe management’s focus on cash flows and geographical diversification in the MMR and Pune should keep its long-term growth trajectory intact,” the brokerage said, adding that faster land monetisation at Palava, portfolio growth, geographical diversification and annuity asset sale can be potential stock catalysts.

Nuvama has a ‘buy’ rating on the Macrotech stock with a target price of Rs 1,357 per share. “We await more clarity on the new revenue recognition and continue to follow the old method for FY24 and FY25 and a gradual shift to percentage completion method from FY26 onwards,” it said.

Also Read | Macrotech Developers falls 2% amid profit booking after strong Q3 show

Motilal Oswal analysts believe that with a strong launch pipeline of 4.4msf worth Rs 6,300 crore for Q4 FY24, Macrotech Developers remains on track to achieve its annual bookings guidance of Rs 14,500 crore.

“Further, its low leverage of 0.5x of equity can provide firepower to target aggressive growth given an opportunity,” it said while reiterating its ‘buy’ rating on the stock with an unchanged target price of Rs 1,295.

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