Emkay Global Financial has given Buy recommendation for Macrotech Developers with a target price of Rs. 1600 in its research report issued on Nov 29, 2021
Emkay Global Financial’s report on Macrotech Developers
We believe Macrotech’s scale of operations is geared for a reset following the soonerthan-anticipated Rs40bn capital raise. Over the next 12-18 months, the developer plans to deploy a majority of the capital in joint development agreements (JDAs) amounting to Rs400bn in gross development value (GDV). This implies a quarterly GDV run rate of Rs60-65bn of new JDAs vs. the previously envisaged run rate of Rs20-30bn per quarter. Going deep into new micro markets remains the core strategy. Macrotech enjoys a leadership position in its existing micro-markets with a ~15-30% market share. It aims to replicate a similar market share performance in new markets. In our view, a faster turnaround in terms of both launches and absorption of recently signed JDAs supports the company’s market share ambitions. Notably, the sales-to-launch ratio in Pune/Kandivali has been in the range of 15-60% in 3-4 months after a soft launch.
Outlook
We raise our Dec’22 TP to Rs1,600 (vs. Rs1,250 previously), valuing the development NAV at ~Rs1,000 per share and a development NAV premium of Rs600 per share. Key factors driving our TP change include: 1) annual JDA assumption of ~Rs160bn through FY23 to FY27 vs. Rs110bn earlier; adding Rs74 per share to NAV; and 2) development NAV premium of 60% (vs. 35%) arrived by using our proprietary NAV premium framework.