Wednesday, July 29, 2009

CMP Rs 300 EPS Rs 11.36 Book Value Rs 217 Debt/Equity 0.3
MAHINDRA LIFESPACE DEVELOPERS LTD (previously known as MAHINDRA GESCO DEVELOPERS LTD) is a subsidiary of M&M LTD and has been in the forefront of urban development in the country. A part of the $6.3billion Mahindra Group, the company has developed premium residential and commercial properties in Mumbai, Pune, Delhi, Chennai and the Mahindra World Cities at Chennai and Jaipur. The Company has completed residential projects of 3 million sq. ft. and another 2.97 million sq. ft. are under various stages of development. Mahindra Lifespaces is also involved in the business of establishing, acquiring, developing and maintaining Industrial Parks, Technology Parks, Software Parks, Special Economic Zones (SEZs), Export Processing Zone, Integrated Townships, Industrial Areas and Industrial Estates. Through a subsidiary, the company has promoted the country's first operational Special Economic Zone (SEZ) and India's first integrated Business City in a public-private partnership model - Mahindra World City, New Chennai. It has recently launched Mahindra World City, Jaipur and is coming up with similar SEZs in Thane and Karla. Mahindra Infrastructure Developers Ltd - the other subsidiary company - is involved in water and sanitation segments.
Q1 Performance:-
MAHLIFE has posted PAT growth of 7% (YoY) to Rs 10.42Cr. It has posted Sales of Rs 47.26 Cr in Q1FY09, which is down 2% YoY but as the company was able to maintain selling prices even in uncertain market, the sales rose 51% on QoQ basis. In this quarter the operating companies in Chennai SEZ stand at 24 and Jaipur SEZ at 16. The total employed personnel in Chennai SEZ is 12,500 and Jaipur SEZ is 1,000. The total leased area in Jaipur SEZ is 1,15,000 sq. ft out of which 61,000 sq ft 
was leased during the quarter to an IT Park.
Jaipur SEZ: As on 3 March 2009, (i) the Light Engineering and the Handicrafts SEZs, spread across 250 acres each, were inaugurated, and (ii) MLL entered into a tie-up with SBI for setting up SBI's North India hub in the DTA part of its Jaipur SEZ. MLL has already received commitments for ~600 acres in the processing area from key tenants such as Infosys, Wipro, Tech Mahindra, Deutsche Bank, Nagarro, Nucleus Software and Talbros.
Chennai SEZ: The management is in advanced stages of acquiring additional ~300 acres of land, which would be an extension of the current processing area at the 1,400- acre Chennai SEZ. In FY09, the workforce at the Chennai SEZ increased by 60% to 12,000 employees. MLL expects to have an total workforce of 0.1m+ by FY14 functioning in the Chennai SEZ. MLL is likely to launch the additional ~300 acres of processing area in FY10- FY11. The management has proposed to launch two new residential projects during FY10.
  • MAHLIFE is the only company in India which is having two operational SEZ’s. 
  • The government will extend tax breaks for industrial park schemes and developers of real estate and road projects to stimulate the economy and lift growth to 8-9 percent by the end of 2010, the finance minister said on Monday, 27Jul2009.
  • MAHLIFE has very low debt levels (as compared to other Realty majors such as DLF, UNITECH) with debt-equity ratio of just 0.3 and so does not face pressures from high interest costs. 
  • SEZs enjoy better margins and once MAHLIFE commences operations at SEZs, it is expected to post even better numbers and low debt will not put pressure on them to lower selling prices which will improve the margins further.
  • MAHLIFE is a value buy at Rs 300 and its EPS is expected to grow to Rs 27-28 in next 1-2 years from current Rs 17 with its low interest costs because of small leverage and existence in SEZs can bring better margins in the future.
Technical View:-
The stock of MAHLIFE got sold off in overall market correction after hitting Rs 1300 in May'06. It hit all time low of Rs 83.40 in March'09 and now looks to have started trending up once again. MAHLIFE should be accumulated near Rs 275-300 and over 12-18 month period the stock can target Rs 520 and more also. Buying in lower levels will provide more value for the investor. 

"Price is what you pay, value is what you get" - Warren Buffet

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