Motilal Oswal Financial Services has reaffirmed a "BUY" rating on Macrotech Developers (LODHA), citing a strong operational performance and robust growth outlook. With a newly revised target price of Rs 1,625, representing a potential upside of 25% from current levels, the brokerage sees Macrotech Developers as well-positioned to capture ongoing market opportunities. Solid momentum in pre-sales, collections, and project launches, coupled with a leaner balance sheet and improving operational cash flow, reinforce confidence in the company’s growth trajectory.

Operational Performance Remains Strong Across Key Metrics

Pre-sales Momentum:
During Q4FY25, LODHA’s pre-sales surged 14% year-over-year (YoY) and 7% quarter-over-quarter (QoQ) to Rs 48.1 billion, while volumes expanded by 4% YoY and 15% QoQ to 3.6 million sq ft (msf). The full-year FY25 pre-sales reached Rs 176.3 billion, exceeding initial guidance. For FY26, the company aims to clock pre-sales of Rs 210 billion with volume guidance of 11 msf.

Collections and Operating Cash Flows:
Collections grew 26% YoY in Q4FY25 to Rs 44.4 billion, outpacing estimates by 20%. Full-year collections rose 29% YoY to Rs 144.9 billion. Consequently, operating cash flows (OCF) expanded 26% YoY to Rs 65.3 billion in FY25, with an FY26 target of Rs 77 billion.

Launches and New Business Development:
Macrotech launched projects totaling 9.8 msf with a Gross Development Value (GDV) of Rs 137 billion during FY25. In Pune alone, two new projects were added with a combined GDV of Rs 43 billion. The FY26 launch pipeline stands strong at 13.1 msf with a GDV target of Rs 188 billion.

Improved Financial Performance Strengthens Investment Case

Revenue and EBITDA Growth:
Q4FY25 revenue rose 5% YoY to Rs 42 billion, while full-year revenue increased 34% YoY to Rs 138 billion. EBITDA climbed 49% YoY to Rs 40 billion, exceeding projections by 9%.

Margin Expansion:
EBITDA margins expanded by 300 basis points YoY to 29% in FY25. Adjusted EBITDA margins (excluding interest capitalizations) were even higher at 36.1%.

Profitability Surge:
Adjusted PAT in Q4FY25 rose 37% YoY to Rs 9.2 billion, leading to an impressive 70% YoY jump in FY25 adjusted PAT to Rs 27.6 billion.

Balance Sheet: Healthier with Controlled Leverage

Net Debt Reduction:
Net debt decreased by Rs 3.2 billion sequentially to Rs 39.9 billion as of Q4FY25. The net debt-to-equity ratio improved to a comfortable 0.20x, supported by strong cash collections.

Credit Rating Upgrade:
Both Crisil and India Ratings upgraded LODHA’s credit rating to AA (Stable), reflecting the company's prudent financial management.

Dividend Declaration:
LODHA announced a final dividend of Rs 4.25 per share for FY25, further enhancing shareholder returns.

Strategic Growth Drivers Fuel Future Outlook

Expansion into New Geographies:
The company continues its strategic expansion into Bengaluru, aiming to grow its contribution from 2-3% of sales currently to 15% over the next decade. New projects in Bangalore and Pune significantly boost its diversified regional presence.

Digital Infrastructure Push:
The company is expanding its digital infrastructure portfolio with acquisitions in the NCR and Chennai markets. It successfully leased 0.8 msf of space to marquee tenants like Skechers, Zomato, and DHL, positioning itself as a rising player in the logistics and data center segments.

Rental Income Target:
By FY31, LODHA aims to achieve over Rs 15 billion in annual rental income, supporting its goal to become net-debt-free.

FY26 Guidance Reflects Confidence in Sustained Growth

Operational and Financial Guidance:

Pre-sales Target: Rs 210 billion

OCF Guidance: Rs 77 billion

Embedded EBITDA: Rs 69.3 billion with a 33% margin

PBT and PAT margins: 29% and 22%, respectively

Business Development Target: Rs 250 billion

Launch Pipeline:
17 new projects across Mumbai Metropolitan Region (MMR), Pune, and Bangalore are planned, with an expected GDV of Rs 188 billion.

Valuation: Premium Justified by Strong Fundamentals

Net Asset Valuation (NAV):
Motilal Oswal values LODHA’s residential business using a Discounted Cash Flow (DCF) approach, applying a 12.5% Weighted Average Cost of Capital (WACC). The net asset value (NAV) stands at Rs 1,201 billion. After factoring a 35% premium for the company's strong growth prospects, the target price is derived at Rs 1,625.

Valuation Metrics:

FY26 P/E: 35.6x

FY26 EV/EBITDA: 25.9x

Dividend Yield: 0.3%

Key Upside Drivers:

Strong launch momentum and new project additions

Expansion into new cities and digital infrastructure

Healthy balance sheet and cash generation

Continued margin expansion

Actionable Investment Insight

Motilal Oswal’s revised outlook underscores LODHA's steady execution and strategic growth initiatives, making it an attractive investment opportunity in India's thriving real estate sector. With a robust financial profile, diversified presence, and visible earnings growth, Macrotech Developers stands out among peers.

Recommendation: BUY
Target Price: Rs 1,625
Upside Potential: 25%

Disclaimer

Investors are advised to conduct their own due diligence and consult with a certified financial advisor before making investment decisions. Stock markets are subject to risks, and past performance is not necessarily indicative of future returns.