Maintain BUY on DLF - Robust performance - HDFC Securities

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

DLF surprised positively on presales at INR 10bn (6.6x/-5% YoY/QoQ) despite the lockdown during the quarter. While office collection remains robust at 99%, occupancy at DCCDL declined to 86% vs. 88% at Mar 21-end. The consumption of malls rebounded to 50% of pre-COVID level during Jun-21, with footfalls exhibiting a rising trend. With robust Q1FY22, DLF is well on course to achieve INR 40bn presales in FY22, aided by 8msf launches. Net debt also continues to trend down (INR 47.bn vs INR 49bn on Mar-21). We maintain BUY on DLF, with increased target price of INR 390/sh (roll forward to Jun-23), higher land bank valuation, likely bottoming of vacancies and resultant cap rate compression. We increase FY22/23E EPS by 15/30% to account for higher residential demand, price hikes, and better margins.

Q1FY22 highlights: Revenue: INR 11.3bn (+107%/-33.5% YoY/QoQ, 12.4% beat). EBITDA: INR 3.9bn (+24x/-12.9% YoY/QoQ, 69.6% beat). EBITDA margin: 34.7% (0.3%/26.5% in Q1FY21/Q4FY21) due to better product mix and lower overheads. Share of profits & associates and JVs: INR 1.35bn (+26.4%/- 38.4% YoY/QoQ). APAT: INR 3.37bn vs INR (0.7)/5.1bn in Q1FY21/Q4FY21, 17% beat. DCCDL revenue grew 12% YoY to INR 10.4bn and profit grew 26% to INR 2bn.

Robust residential and steady rental portfolio: Presales for Q1FY22, at INR 10.1bn (6.6x/-5% YoY/QoQ), was robust, on the back of an encouraging response to new independent floor launches (INR 5bn) and continued traction in Camellias (INR 3bn). With new launches of 8 msf and completion of the clubhouse of Camellias, DLF may exceed its sales target of INR 40bn. The DCCDL office portfolio collection was at 99% with occupancy remaining steady at 86% (vs 88% in Mar-21), while retail vacancy stood at 4%. DLF believes vacancy has hit the bottom and leasing momentum will pick up from H2FY22.

Balance sheet comfortable: DLF generated cash surplus of INR 1.41bn, which aided net debt reduction to INR 47.4bn (vs. INR 49bn at Mar-21 end), with net D/E at 0.13x. Net debt is likely to decline further given project receivables are sufficient to reduce debt and new project cash flow will be able to meet construction outflows. The company also brought down interest costs from 8.4% in FY21 to 8.2% during the quarter.

Shares of DLF LTD. was last trading in BSE at Rs. 332.3 as compared to the previous close of Rs. 336.95. The total number of shares traded during the day was 618305 in over 6984 trades.

The stock hit an intraday high of Rs. 339.5 and intraday low of 326.45. The net turnover during the day was Rs. 205267575.

Source : Equity Bulls

Keywords