Macrotech’s FY25 pre-sales growth goal on firm ground but not without challenges

Investors rewarded the stock for resilience in pre-sales or bookings of housing units amid elevated home loan rates. Lodha has also kept its promise of achieving a 20% compound annual growth rate in pre-sales.

Despite a high base, it ended FY24 with record pre-sales of ₹14,500 crore and price growth of 5.5% year-on-year. For FY25, it has set a pre-sales target of ₹17,500 crore. This is likely to be driven by a combination of favorable factors of price increase of 5-6% year-on-year, volume growth of 4-5% in existing projects and increased contribution from new projects and new geographies, the management said.

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Lodha plans to launch 17 projects/phases spanning 10 million square feet with a gross development value of around ₹12,100 crore in FY25. From its newly forayed markets of Pune and Bengaluru, Lodha is targeting nearly ₹4,000 crore pre-sales in FY25. It also plans to launch premium housing in Palava in Q1FY25.

Among other monitorables, the company eyes ₹21,000 crore worth of business development projects in FY25. Further, the management has guided that it will keep debt below 1x net debt-to-operating cash flow in FY25.

The recent fund-raise via qualified institutional placement coupled with robust cash collections has helped Lodha meaningfully pare debt in FY24, thus allaying earlier concerns of elevated leverage. This can help the company meet its expansion aspirations without putting pressure on its balance sheet.

So far, so good. However, after last year's steep rally in the stock, a lot will depend on the pace of new launches. Plus, the exhaustion of current ready inventory as meeting pre-sales targets hinge on it.

Apart from that, faster land monetization at Palava in Dombivali, portfolio growth, geographical diversification and annuity asset sale can be potential stock catalysts, according to a Nuvama Research report. On the flipside, geographical concentration in the Mumbai Metropolitan Region (MMR), given the entry of newer companies with stronger balance sheets should be watched out for.

To be sure, Lodha has been among the beneficiaries of increased consolidation in the sector, but the management has acknowledged increased competitive intensity in the crucial Mumbai market.

Currently, the company holds a 10% market share, while large developers collectively control 20-25% of the market, the management said. Further, large unsold inventory due to any loss of demand momentum could weigh on growth in realizations.

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