Pick of the week: This Mahindra's realty arm looks best bet; gains 4% today
So, what is the reason behind Mahindra stock price gaining today despite Sensex and Nifty 50 trending on massive negative note?
While Indian benchmark indices were on the hotbed, as investors decided to remove their money, there was one stock of Mahindra Group that was swinging to a whole set of different emotions. Today, realty arm of the group, namely Mahindra Lifespace Developers, surged by nearly 4% with an intraday high of Rs 475 per piece on BSE. However, the company's stock price ended at Rs 470.50 per piece above Rs 13.30 or 2.91%.
So, what is the reason behind Mahindra stock price gaining today despite Sensex and Nifty 50 trending on massive negative note? Guess what! HDFC Securities has identified Mahindra Lifespace Developers as best pick for investors this week.
According to HDFC Securities, investment is good in Mahindra Lifespace because of four reasons.
- Big beneficiary of the government's policies regarding the affordable housing sector in the country.
- Growth in the SEZ business.
- Structural changes in the industry are expected to have a positive impact on the company.
- Strategic partnership to drive growth.
Kushal Rughani, analyst at HDFC Securities said, "Mahindra Lifespace Developers has a strong balance sheet, and has been able to raise capital at competitive terms even during challenging times. With its focus on execution, the company has been successful in attracting equity participation in both residential and industrial projects, thereby increasing the efficiency of the utilisation of its risk capital. As the economic environment improves further, the company is well positioned to benefit from the opportunities.
Therefore, Rughani says, "We expect robust growth in the company's net profit post FY18, and believe that it will surge to Rs 158 crore in FY20. We expect revenues to witness strong growth post FY18, as the company's projects become operational. Similarly, the EBITDA margin would also witness strong expansion over FY18-20E. We see 23% revenue CAGR, 31% EBITDA and 26% CAGR over the same period, led by Mahindra World Clusters at Jaipur and Chennai and higher sales from its residential units."
Considering the above, Rughani said, "Based upon 1.4Xprice/book and 18xFY120 earnings with target price of Rs 565. We recommend Mahindra Life as Buy at CMP of Rs 457 and add on dips to Rs 414 with TP of Rs 565 over the next 4 - 6 quarters."
Mahindra Life currently trades at 15xFY20E earnings and 1xFY20 book value.