Buy Mahindra Life; target of Rs 600: Motilal Oswal

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Buy Mahindra Life; target of Rs 600: Motilal Oswal

Motilal Oswal is bullish on Mahindra Lifespace Developers and has recommended buy rating on the stock with a target of Rs 600 in its October 25, 2010 research report.

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Motilal Oswal is bullish on Mahindra Lifespace Developers and has recommended buy rating on the stock with a target of Rs 600 in its October 25, 2010 research report.

"During 1HFY11, Mahindra Lifespace Developers (MLL) acquired several parcels of land in (1) Mumbai (0.38msf), (2) Pune (1.8msf), and (3) Hyderabad (JDA 1msf). We expect the projects to be value accretive and expect to contribute (1) Rs 8 per share (Kandivali, Mumbai project), (2) Rs 12 per share (Ghatkopar, Mumbai project) (3) Rs 10 per share (JDA project in Hyderabad), and (4) Rs 40 per share (Pune). Hence we are revising our NAV by Rs 40 per share to Rs 600 per share to capture the value accretion from new projects."

"MLL has (1) a sound business model, (2) strong brand equity, (3) established client relationships, and (4) a strong balance sheet. Our SOTP value for MLL is Rs 600 per share: (1) Chennai SEZ at Rs 166 per share, (2) Jaipur SEZ at Rs 159 per share, (3) residential vertical at Rs 210 per share, and (4) other rental assets at Rs 60 per share. Our NAV does not include (1) 50 acres at Chennai SEZ for planned commercial/retail use, and (2) two planned DTA/SEZs aggregating 4,000 acres in Chennai and along the Mumbai-Pune Expressway."

"We expect earnings to increase from Rs 786 million in FY10 to about Rs 1.6 billion in FY10, a CAGR of 45%, due to strong contribution from the Chennai SEZ, sale of the processing area in the Jaipur SEZ and increased contribution from premium residential projects. The stock trades at a 20% discount to its SOTP value of Rs 600 per share, which is our target price. Buy," says Motilal Oswal research report.

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