Axis Securities has issued a BUY recommendation for Man Infraconstruction Limited with a target price of Rs 240, representing a 21% upside from its current market price of Rs 198. MICL, a major player in the Mumbai real estate market, is focusing on strategic acquisitions, sustainable growth, and project execution. The company has a robust project pipeline and continues to enhance its profitability through an asset-light business model and minimal debt. Investors are advised to consider MICL as a long-term value play with strong earnings potential, supported by a solid balance sheet and upcoming project launches.

Business Model and Growth Outlook

- Project Pipeline and Cash Flow Visibility: MICL has strong cash flow visibility from ongoing projects, with a Q1 FY25 revenue run rate of Rs 321 crore. The company’s flagship projects include Tardeo-Aaradhya Avaan, which is 70% sold and poised for further launches post-October 2024. Key upcoming projects include Pali Hill in Bandra, and a gated community in Ghatkopar East.
Strategic Acquisitions: MICL is actively acquiring land in prime areas such as Goregaon, with a projected topline of Rs 4,500 crore by FY27. Additionally, the company is set to launch new phases for its Dahisar and Vile Parle projects, all of which align with MICL's strategy of sustainable, high-margin growth.

Financial Performance

- Revenue and Profitability: MICL is expected to deliver net sales of Rs 1,225 crore in FY25, with EBITDA margins rising to 28.8%. Net profit is projected to reach Rs 357 crore by FY25, up from Rs 300 crore in FY24, supported by a 25% profit after tax (PAT) margin—the highest among its peers.
Asset-Light Model: MICL's business strategy revolves around maintaining low leverage while generating healthy cash flows. The company raised Rs 543 crore through a preferential issue to fund new acquisitions, and continues to generate interest income on free cash reserves.

Expansion in the EPC Segment

- Order Book Growth: As of Q1 FY25, MICL’s EPC order book stands at Rs 728 crore. The company is bidding for major projects, including the Rs 72,000 crore Wadhwan port bid. The EPC division is also responsible for managing in-house construction work, enabling cost efficiencies and faster project completions.

Investment Rationale

1. High Margin Projects: MICL is prioritizing projects that provide a high return on equity. The company is targeting an internal rate of return (IRR) exceeding 100% for its development management (DM) projects, including Aaradhya Avaan and Vile Parle.
Strong Sales Momentum: MICL has consistently delivered projects ahead of schedule, building trust with buyers and enabling premium pricing. For instance, the company’s Ghatkopar One Park redevelopment project has already generated Rs 500 crore in sales.

Low Debt, High Growth: MICL's low leverage, with minimal reliance on external borrowing, positions it to capitalize on future growth opportunities while managing risks effectively.

Target and Valuation

Axis Securities values MICL at **18.4x FY25 earnings**, with a target price of Rs 240, reflecting a 21% upside from its current price. The company’s strong earnings growth, strategic acquisitions, and superior cash flow management support this valuation.

Risk Factors

1. Delays in Project Approvals: MICL’s acquisition of cluster redevelopment projects involves longer turnaround times (TAT) due to the complexity of approvals, which could delay revenue recognition.
Exposure to Mumbai Real Estate Market: MICL’s dependence on the Mumbai real estate market could pose risks in case of economic downturns or regulatory changes impacting the city’s real estate sector.

Conclusion

Man Infraconstruction Ltd. is well-positioned to capitalize on its asset-light model, robust project pipeline, and strategic acquisitions in the Mumbai region. The company’s financial strength and proven track record of project execution make it an attractive investment for long-term growth. Axis Securities’ recommendation to **buy** with a target price of Rs 240 underscores confidence in MICL’s ability to deliver sustainable value to its shareholders over the next 12 months.