Recommendation from a Construction - Residential & Commercial Complexes

This column gives you a scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

MARATHON NEXTGEN REALTY LTD.: STRUCTURING GOOD PROFITABILITY

HERE IS WHY
✓ Expansion into new areas
✓ Increase in net revenue
✓ Extensive land banks in Mumbai region

The real estate sector comprises four sub-sectors, namely, housing, retail, hospitality and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The real estate sector in India is expected to reach USD 1 trillion in market size by 2030, up from USD 200 billion in 2021, and contribute 13 per cent to the country’s GDP by 2025.

India is among the top 10 priceappreciating housing markets internationally. In the realty sector, Marathon Nextgen Realty Ltd. is recommended as a noteworthy company, which is primarily engaged in the business of construction, development and sale of commercial and residential real estate projects. The company is entering into new areas like SEZs, townships, infrastructure development, entertainment and leisure, education, hospitality and the capital markets.

In Q4FY23, on a consolidated basis its net revenue increased by 3.08 per cent YoY to ₹170.45 crore compared to ₹165.35 crore from the previous year’s same quarter. On a sequential basis, revenue declined by 38.78 per cent. PBIDT excluding other income dropped by 6.50 per cent to ₹41.25 crore YoY as compared to ₹44.11 crore from the previous year’s same quarter, while sequentially it dropped by 67.35 per cent. Net profit stood at ₹15.60 crore compared to ₹19.57 crore, a YoY decrease to negative 20.26 per cent. The business of the company depends on cyclic movements, which explains why there is so much difference in sales and revenue QoQ and YoY. 

In FY23, the company sold area of around 452,775 sq. feet which has booking value of around ₹601 crore. As of March 2023, the company’s inventory of unsold value is around ₹390 crore with unsold area of around 185,000 sq. feet. The estimated revenue from unsold and sold launch projects is about ₹2,092 crore. The company has upcoming projects to launch approximately 3,150,000 sq. feet of area valued at around ₹4,660 crore across multiple projects in the next one to three years.

The company’s profit from joint venture with Adani Realty in the Monte South project of ultra-luxury homes has already attracted bookings but the major part of the profit may not yet be reflected in the books in the upcoming quarters. The Marathon Group has extensive land banks across the Mumbai Metropolitan Region (MMR) with more than 100+ acres in each region of Panvel, Thane, Bhandup and Dombivli. The company has many different brands and subsidies and is considering consolidating its corporate structure, which will help it to perform better.

The company’s main strength is to find the right land location that ensures good capital appreciation and use that land to deliver maximum benefit by making optimum use of it. The shares of the company are currently trading at a PE of 12.3x as against the industry PE of 31.5x and lower than its three-year median PE of 20.1x. In the last three years the company has delivered average ROE of 8.95 per cent and ROCE of 16.4 per cent, respectively. The company has a debt-toequity of 1.11x. Taking into account the company’s business and its market, we recommend BUY.