Buy This Large Cap Real Estate Stock With A Target Price of Rs 460: HDFC Securities

The brokerage company HDFC Securities has issued a buy recommendation on DLF Ltd's stock. The company is a large-cap real estate company with a market capitalization of Rs 99,816.94 crore. The brokerage has set a target price of INR 460 for the stock, which may rise 14 percent in a year from its current market price of Rs 402.60 as of 3 February, 3:30 pm IST.

Financial results of DLF Ltd

The brokerage has said in a report that "Revenue was INR 15.5bn (+0.4%/+4.6% YoY/QoQ, a 3% beat). EBITDA was INR 5.2bn (+4.5%/+14% YoY/QoQ, a 13% beat). EBITDA margin came at 33.6% (+130 bps/+270 bps YoY/QoQ, 282bps beat). Share of profits in associates and JVs: INR 1.88bn (+13.1%/+24% YoY/QoQ). RPAT was INR 3.8bn (-15.5%/+0.4% YoY/QoQ). DLF has a net investment of INR 4bn in one of its investee companies (Joyous Housing Ltd) with 1.4msf carpet area. Due to this JV defaulting on its debt obligation and turning NPA, DLF made a provision of INR 2.2bn. Consequently, APAT came at INR 5.5bn (43% beat). DCCDL revenue/profit grew 7/13% YoY to INR 11.4/2.8bn."

According to HDFC Securities "Presales for Q3FY22, at INR 20bn (+98%/+34% YoY/QoQ), was robust, on the back of an overwhelming response to the newly launched 'ONE Midtown', which registered presales of INR 7bn. Camellias registered presales of INR 5.8bn (vs INR 10bn in Q2FY22). With INR 45bn of presales 9MFYTD, DLF has revised its guidance for the full year to INR 60-65bn vs INR 40bn earlier. The DCCDL office portfolio collection was at 100%, with occupancy flat QoQ at 86%. With better office leasing and marginally lower vacancy than Q2FY22, DLF expects the vacancy to reduce further in Q4FY22 and reach 9-10% in Q1FY23."

The brokerage has also highlighted that "DLF has revised its sales potential to INR 470bn (vs INR 300-400bn in Q2FY22) due to higher realisations than estimated. DLF sold 0.7msf of ONE Midtown project at an APR of INR 19,000 per sq. ft. and took a price hike of INR 2,000-2,500 per sq. ft in tower C (to be launched in Q4FY22). DLF has also taken a price hike of INR 5,000 per sq. ft. in Camellias. DLF generated a cash surplus of INR 7.6bn, the highest in the past five years, which reduced net debt to INR 32.2bn (vs. INR 39.9bn at Sep-21 end); net D/E is now at 0.09x (vs. 0.11x at Sep-21 end). Construction outflow guidance for FY22/23 is INR 9/14bn.

Buy Rating With A Target Price of Rs 460

HDFC Securities has claimed that "DLF booked record presales of INR 20bn (+98%/+34% YoY/QoQ) on the back of an overwhelming response received by project 'ONE Midtown'. It has surpassed its INR 40bn presales guidance for FY22, with 9MFYTD sales coming in at INR 45bn; thus, it revised its sales guidance upwards to INR 60- 65bn. The company made an impairment provision of INR 2.24bn for its Mumbai Tulsiwadi SRA JV project, towards an NPA loan. It has been servicing the debt for some time but due to the inability of the other two partners to bring in their contribution, it stopped servicing as well. DLF is in talks with JV partners for an amicable resolution and further updates shall be communicated on May-22. Net debt continues to trend down (INR 32bn vs INR 40bn in Sep-21). Given there are (1) price hikes in the premium segment, (2) higher presales guidance, and (3) robust launch plans, we maintain BUY, with a TP to INR 460/sh."

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.