Buy Macrotech Developers, target price Rs 1600: Emkay

Emkay Global Financial Services has a buy call on Macrotech Developers Ltd. with a target price of Rs 1600, for an investment time horizon of 12 months. The current market price of Macrotech Developers is Rs 1465.95.

Macrotech Developers Ltd., incorporated in the year 1995, is a Small-Cap company (with a market cap of Rs 70824.77 Crore) operating in Real Estate sector.

Macrotech Developers Ltd. key Products/Revenue Segments include Property Development, Land Development Rights, Rental Income, Other Operating Revenue and Building Materials for the year ending 31-Mar-2021.


Investment Rationale
Emkay believes Macrotech’s scale of operations is geared for a reset following the sooner-than-anticipated Rs 40 bn 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 Rs 400 bn in gross development value (GDV). This implies a quarterly GDV run rate of Rs 60-65 bn of new JDAs vs the previously envisaged run rate of Rs 20-30 bn per quarter.

The brokerage raises its Dec 2022 TP to Rs 1,600 (vs Rs 1,250 previously), valuing the development NAV at ~Rs1,000 per share and a development NAV premium of Rs 600 per share. Key factors driving its TP change include:

1. Annual JDA assumption of ~Rs 160 bn through FY23 to FY27 vs. Rs 110 bn earlier; adding Rs 74 per share to NAV
2. Development NAV premium of 60 per cent (vs 35 per cent) arrived by using its proprietary NAV premium framework

Financials
For the quarter ended 30-09-2021, the company has reported a Consolidated Total Income of Rs 2201.66 Crore, up 28.57 per cent from last quarter Total Income of Rs 1712.36 Crore and up 122.80 per cent from last year same quarter Total Income of Rs 988.18 Crore. Company has reported net profit after tax of Rs 223.16 Crore in latest quarter.

Promoter/FII Holdings
Promoters held 88.5 per cent stake in the company as of 18-Nov-2021, while FIIs owned 8.73 per cent, DIIs 1.06 per cent.