Sales Up 2.6x YOY, This Stock Can Scale Up In FY2023, Sharekhan Suggests Buy For 36% Gains

Stock Outlook

Sharekhan is bullish on the stocks of DLF Ltd. The brokerage has given a 'buy' rating for a target price of Rs 455, the stock has the potential of 36.9%. On 23 May 2022, the stock opened at Rs 334.55, however, currently, it is trading at Rs 332.35. In the last 1 year, the share price of the stock got momentum and gained over 22%. It touched the 52 week low of Rs 261.40 on 20 May 2021. Whereas, the 52-week high of Rs 449.70 on 18 October 2021.

"It is currently trading at a P/BV of 2x on FY2024 earnings and premium to NAV valuation. We retain a positive view on the stock with a potential upside of 40% considering strong growth potential in its residential and rental project portfolios.," Sharekhan has said

Ready to scale up in FY2023

DLF reported strong sales booking (Rs. 2729 crore, up to 2.6x y-o-y), reduced net debt (by Rs. 540 crore q-o-q) and generated a strong cash surplus (Rs. 541 crores, up 2.5x y-o-y) for Q4FY2022. However, consolidated revenues (down 9.7% y-o-y at Rs. 1547 crore), OPM (23.8%, down 275bps y-o-y affected by higher other expenses) and adjusted net profit (Rs. 405 crores, down 15.7% y-o-y) were lower than expectations. The company deferred guidance for FY2023 to next week's analyst meeting. However, it has a strong launch pipeline of 7.6msf/9.2msf for FY2023/FY2024. It expects to generate a higher cash surplus than Rs. 2200 crore generated during FY2022 despite significant spending on construction (2x spends y-o-y), approval costs and dividend payouts during FY2023. At DCCDL, it expects a rental income of Rs. 4200 crore to Rs. 4500 crore in FY2023 from Rs. 3900 crore FY2022 exit rentals. It would be ready with its REIT in two months and would decide on its launch.

Sharekhan's Comments and views on the stock

Keeping its positive buy rating with good potential gains, the brokerage has stated the key positives of the stocks, "Strong rise in sales bookings y-o-y, continued cash surplus generation q-o-q and net debt reduction q-o-q. Strong rise in product prices of key projects like Camellias, Midtown One and plotted developments at New Chandigarh and Chennai over a period of one year.' Commenting in the negatives, the brokerage has stated, "OPM affected by a sharp rise in other expenses on account of scale-up costs and year-end provisioning. Physical occupancies in office spaces remain weak while expected to reach near normalcy by Q2FY2023."

About the Company - DLF Ltd.

DLF Ltd is one of India's well known real estate company founded in 1946 and based in the Delhi-NCR region. With its subsidiaries, associates and JVs, the company is engaged in real estate development, from the identification and acquisition of land to the planning, execution, construction and marketing of projects. It is also engaged in the business of leasing, generation of power, provision of maintenance services, hospitality and recreational services which are related to the overall development of the real estate business. Today, DLF is the largest publicly listed real estate company in India, with residential, commercial, and retail properties in 15 states and 24 cities.