Maintain BUY on DLF - Gaining traction - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

Presales during the quarter remained flattish at INR 10.6bn vs INR 10.2bn QoQ. While office collection remains robust at 100%, occupancy at DCCDL further declined to 89% from 91% at Dec 20-end. Consumption at retail malls reached 90% of 4QFY20 level during the quarter, with footfalls at 81%. Relief to retailers would be on similar lines as extended during the first lockdown. DLF is targeting INR 40bn presales in FY22 on the back of 7msf launches and expects office occupancy at pre-COVID level by FY23. Gradual recovery in presales, strong launch pipeline, and REIT plans for DCCDL could warrant a rerating. We maintain BUY on DLF, with increased target price of INR 360/sh (roll forward to FY23E, reduce cap rate to 8.5% vs 9.2% earlier and assume 0-5% price increases across projects in line with DLF commentary).

4QFY21 highlights: Revenue: INR 17.1bn (+1%/+11% YoY/QoQ, 9.6% miss). EBITDA: INR 4.5bn (+43%/-9% YoY/QoQ, 25% miss). EBITDA margin: 26.5% (18.7%/32.3% in 4QFY20/3QFY21). Share of profits in associates and JVs: INR 2.2bn (+24%/+31% YoY/QoQ). Taxes: INR 1.6bn, which includes settlement of tax demand of INR 302.5mn under the 'Vivad se Vishwas' Act. RPAT: INR 4.8bn vs INR (18.6)/4.5bn in 4QFY20/3QFY21. APAT: Adjusting for the INR 302.5 tax settlement, APAT stood at INR 5.1bn (+31%/+13% YoY/QoQ, 3% miss). Higher other income and share of profit from JVs narrowed EPS miss to 3%.

INR 10bn/quarter presales guidance; pre-COVID occupancy at DCCDL by FY23: Presales for FY21 grew by 24% YoY to INR 31bn, with new launches contributing INR 9bn. Guidance of INR 40bn presales for FY22 is insulated from delay in getting approval for GIC JV. While retail occupancy remained steady at 97%, office vacancy expanded to 12% from 5% at the end of FY20. Management expects recovery in occupancy by FY23 as vaccination would drive normalcy and leasing should gain momentum.

Balance sheet comfortable: Consolidated net debt reduced to INR 49bn at the end of the quarter (vs INR 51bn at Dec-20 end), with net D/E at 0.14x. Net debt is likely to remain at the same level, given the planned residential launches which will be largely self-financed. The company also brought down interest costs from 8.9% in 3QFY21 to 8.4% during the quarter. DLF generated positive operating cash flow of INR 14.6bn in FY21.

Shares of DLF LTD. was last trading in BSE at Rs.308.75 as compared to the previous close of Rs. 299.1. The total number of shares traded during the day was 429378 in over 5371 trades.

The stock hit an intraday high of Rs. 310.9 and intraday low of 300.25. The net turnover during the day was Rs. 130899245.

Source : Equity Bulls

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