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MAHINDRA LIFESPACES

MAHINDRA LIFESPACES: Enters into MoUs for two new integrated projects at Gujarat; Poised for significant scale-up; BUY
Event: Mahindra Lifespaces has enters into 2 MoUs with government of Gujarat: 1) an Integrated Business City and 2) a high quality industrial park   

The expected land acquisition cost for the DMIC project would be ~Rs2.5-3m/acre and the company hopes to acquire it over the next 2-3 years.
It plans to fund the construction through a mix of debt and internal accruals. The management has guided that the net DER(x) may increase to ~0.5x.

MLL has a sound business model, a healthy balance sheet and no land outstanding.

Our current SOTP value for MLL is Rs.600/share. Our valuation doesn’t include the potential upside from its four MoU projects of ~6,500 acres. Although, the clarity on the monetization potential of these pipeline projects is yet to emerge, we believe the contribution from the projects could be as significant as its current projects given their size & attractive locations. Stock trades at ~1.2x FY12E adjusted book value of Rs.300 and at 42% discount to its SOTP value. BUY.