ICICIdirect has maintained 'Buy' on Mahindra Lifespace Developers with target price of Rs 700 as against current market price (CMP) of Rs 506 in its report.

Commenting on the investment rationale, the stock broker said, ''Mahindra Lifespace Developers (MLDL), holder of development rights of the Byculla property, has announced that along with the owner of the property, it has completed the sale of the property. The company's share of the sale consideration is Rs 3.25 billion.

The land acquisition in the last 1-1.5 years would enable it to drive its sales volume from 0.9 mn sq ft in FY14 to 2 mn sq feet in FY16E.

Media reports indicate Assocham has urged the Finance Ministry for removal of MAT on SEZ developers and units. This would be positive for SEZ developers like Mahindra Lifespace as this would lead to better absorption of SEZ units and better cash flow for developers.

Considering its strong parentage advantage and ramp up in the project portfolio led by recent land acquisition, we believe MLDL is currently available at attractive valuation of 1.2x FY16 P/BV and 0.6x FY16 NAV. We maintain our Buy recommendation with a revised target price of Rs 700 (0.8x its FY16 NAV).

We now make changes to our assumptions: i) we consider cost of equity at 14%, ii) reduce our debt assumption with proceeds from Byculla property, iii) incorporate better-than-expected realization for Chennai (Rs 35 million per acre) & Jaipur SEZ (Rs 15 million/acre) and iv) roll over NAV to FY16E.''

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