DLF - 1QFY2013 Result Update - Angel Broking

DLF reported disappointing 1QFY2013 results as both, net sales and net profit were below our estimates. Its sales declined by 10.1% yoy and 16.0% qoq. The revenue came in at Rs.2,198cr for the quarter, ie below our expectation of Rs.2,550cr. The EBITDA declined 4.0% as there was an expansion in the EBITDA margin by 300bp to 48.6% during the quarter. The PAT was down 18.3% for the quarter due to a high interest cost which ate into profitability. The PAT came in at Rs.293cr during the quarter. We maintain our Neutral rating on the stock.

Operating performance remains weak: Sales booking was recorded at 1.3mn sqft down from 6.8mn sqft qoq and 2.3mn sqft yoy, primarily due to lack of new launches during the quarter. Sales activity is expected to pickup in the second half of the year. The leasing activity also remained subdued in line with the past quarter's performance. Leased area during the quarter stood at 0.3 mn sqft (0.29mn sqft qoq and 0.73mn sqft yoy).

Debt reduction remains the key: We expect sales volume to be sluggish over the coming quarters given the inventory buildup in the NCR region, which would impact DLF's cash generating ability. In spite of three assets being in an advanced stage of monetization process, we expect DLF's debt levels to remain elevated and interest expense to continue to eat into profitability. Pickup in sales and better than expected monetization of non-core assets would be rerating events in our view. At current levels the stock is trading at 1.4x and 1.3x on our FY2013E and FY2014E book value, which appears expensive give the low ROE's. We maintain our earnings estimates for the company and maintain our Neutral rating on the stock.

Source : Equity Bulls

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