Marathon Nextgen Realty: PAT 179% & revenue 87% CAGR for FY20-23 at a PE of 12
Marathon NextGen Realty driven by a favourable demand landscape expecting substantial cash flow revenues coming over next three years available at very reasonable valuations
1. Engaged in development of residential & commercial projects
Projects spread across the Mumbai Metropolitan Region (MMR)
marathon.in | NSE: MARATHON
Building townships in the fastest growing neighborhoods, ultra luxury skyscrapers in the heart of the city, affordable housing projects, small offices and large business centers.
Marathon has land banks in Mumbai Metropolitan Region (MMR)
2. Revenue CAGR= 87%, PAT CAGR= 179% for FY20-23
Erratic top-line & bottom-line YoY growth over FY19-23
Area sold is a lead indicator for future revenue and was down in FY23 and needs to be tracked
3. Momentum of FY20-FY23 carried in to Q1-24
Area sold is up in Q1-24 on both YoY and QoQ basis
Return ratios are solid, consistent and improving over the last seven years. Most importantly returns are getting converted to cash.
4. Q1-24 momentum shows in top-line and bottom-line
Revenue increased by 114% YoY and 23% QoQ
PAT increased 258% YoY and 258% QoQ
5. FY24: Strong outlook
i. Substantial cash flow revenues coming over next three years
For next three years, we have from a committed land already with the company, we have a substantial cash flow revenues coming over next three years.
ii. Pipeline visibility is strong
Against an area sold of 45.3 lakh sq.ft in FY23 the pipeline visibility is of 31.5 lakh sq.ft as of Q1-24
Robust Launch Pipeline of upcoming projects of 31.5 lakh sq.ft
ii. Management commentary across Q4-23 & Q1-24, demand tailwinds remain strong
We remain positive on demand environment and would continue to focus on strengthening our financial performance by reducing debt, enhancing our collection efficiency and generating healthy operating cash flows. With a strong launch pipeline and strong execution capabilities, we are confident to achieve outstanding and profitable growth over the mid to long term.
Management commentary in Q4-23
Marathon NextGen Realty results driven by a favourable demand landscape. The ongoing consolidation within the real estate sector, coupled with the reduction in inventory levels signals a promising landscape. These trends point towards a sustained positive trajectory in the real estate cycle, characterized by escalated prices and absorption rates amidst constrained supply
Management commentary in Q1-24
6. Substantial cash flow revenues coming over next three years, at a PE of 12
Valuations at a 12 PE (trailing twelve month), is very attractive considering “substantial cash flow revenues coming over next three years“ and revenue CAGR= 87%, PAT CAGR= 179% for FY20-23
The 12 PE(TTM) corresponds to and PE of around 15 on FY23 EPS.
7. So Wait and Watch
If I hold the stock then one must wait and watch for quarterly results to see if the company is on track to deliver “substantial cash flow revenues coming over next three years“
Q1-24, MARATHON has delivered so one needs to wait for Q2-24. The pattern of sequential YoY growth has just started from FY20. One needs to be very watchful of the sequential growth pattern is not broken.
8. Join the ride
If I am looking to enter the stock then
Valuations are reasonable. PE(TTM) of 12 for “substantial cash flow revenues coming over next three years“ and revenue CAGR= 87%, PAT CAGR= 179% for FY20-23
On the flip side the FY19 to Q1-24 performance is average excluding the FY20-23 time period, its performance is not very exciting.
9 Alternate Idea: Man lnfraconstruction on a strong growth trajectory
Man like MARATHON is developing real estate in Mumbai
MARATHON is cheaper than Man lnfraconstruction. Man lnfraconstruction is bigger than MARATHON and also Man lnfraconstruction has a superior track record as compared to MARATHON
Read about Man lnfraconstruction
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Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades