Lodha Developers builds growth visibility through launches, regional expansion and data centres

Investment View and Growth Thesis

Motilal Oswal Financial Services reiterates its BUY view on Lodha Developers and continues to regard it as its preferred pick among larger property developers. The broker believes the company has demonstrated an ability to diversify beyond the Mumbai Metropolitan Region (MMR) while scaling operations, widening its addressable market, reducing operating concentration and improving medium-term growth visibility.

Continued business development activity and inventory monetisation, together with balance-sheet discipline, underpin the positive view. Lodha Developers has completed business development worth about Rs 1,40,000 crore over the past four to five years.

The revised target price is Rs 1,430, implying 19 per cent upside from the current market price of Rs 1,199.

Pre-sales and Launch Pipeline

Lodha Developers reported 1QFY27 pre-sales of Rs 4,630 crore, up 4 per cent year on year and in line with Motilal Oswal's expectation, despite no significant launches during the quarter. MMR contributed 88 per cent of quarterly pre-sales, while the Extended Western Suburbs contributed Rs 1,900 crore. Land sales accounted for about Rs 1,200 crore, and premium and luxury housing represented around 60 per cent of pre-sales.

The company launched one MMR phase with gross development value of about Rs 330 crore. Momentum is expected to improve, with 21 launches planned for the rest of FY27 and potential gross development value of Rs 24,100 crore. Motilal Oswal retains its forecast for a 16 per cent pre-sales CAGR over FY26-FY28E, taking pre-sales to Rs 27,600 crore.

Management reiterated FY27 pre-sales guidance of Rs 24,000 crore, representing growth of 17 per cent year on year. The first half of FY27 is expected to contribute about 40 per cent of annual sales. The company's maiden NCR launch remains on track for the second half of FY27, while Bengaluru continues to perform strongly.

Business Development and Inventory Visibility

Business development continues to support launch and sales visibility. Lodha Developers added a Pune project in 1QFY27 with 1.9 million square feet of saleable area and estimated gross development value of Rs 2,300 crore.

• Launched but unsold inventory is valued at approximately Rs 41,300 crore.
• Own land and JDA projects scheduled for launch beyond the next 12 months total approximately 71 million square feet.
• The company has about 600 million square feet of land bank in the Extended Eastern Suburbs.

1QFY27 Financial Performance

Reported 1QFY27 financial performance was strong, aided by the concluded Palava land sale. Revenue rose 43 per cent year on year to Rs 5,000 crore, 36 per cent above the broker's estimate. EBITDA increased 95 per cent year on year to Rs 1,922 crore, 84 per cent above estimate, while EBITDA margin expanded 850 basis points quarter on quarter to 38.5 per cent. PAT doubled year on year to a record Rs 1,372 crore, 109 per cent above estimate.

Operating cash flow of about Rs 1,800 crore enabled a Rs 450 crore quarter-on-quarter reduction in net debt to Rs 4,930 crore, equivalent to net debt-to-equity of 0.2 times. Management expects the development company to become net debt-free in the coming years.

Data-Centre Business and Annuity Potential

The data-centre business provides an additional medium-term growth avenue. Lodha Developers completed a Digital Edge land transaction at about Rs 42.5 crore per acre. Of its 660-acre integrated data-centre park, 132 acres had been sold by 1QFY27.

Management plans to monetise a further 143 acres over three years for about Rs 9,000 crore, at Rs 60 crore per acre. This could fund a 1GW built-to-suit power-shell data centre on 90 acres, with annual rental potential of Rs 2,000 crore by FY32. Management expects the first power-shell leasing transaction in FY27 and construction to begin during CY26. It has reiterated its objective of tenfold overall annuity-income growth over six years.

Valuation and Target Price

Motilal Oswal values Lodha Developers using a sum-of-the-parts approach. The development company is valued at a 20 per cent premium to residential NAV, using an 11.0 per cent WACC for residential NAV. Commercial and retail, digital infrastructure and industrial businesses are valued at a 7.5 per cent capitalisation rate.

The broker considers the premium justified by ongoing business development, although further NAV-premium expansion depends on the pace of project additions. The revised target price is Rs 1,430, compared with the current market price of Rs 1,199.

Key Risks

• Launches could be deferred amid geopolitical uncertainty.
• Sustained high energy prices could raise construction costs by 1-1.5 per cent.
• Higher construction costs could reduce project-level EBITDA margin by 35-75 basis points.