DLF - Well poised for growth - ICICI Securities

DLF achieved a significant QoQ operational improvement in Q2FY21 across segments with Rs4.7bn of net residential sales bookings (up 3x QoQ) and 9% QoQ increase in DCCDL rental income to Rs7.2bn on account of recommencement of mall rentals. DLF's net debt (ex-DCCDL) remained flat QoQ at Rs52.2bn on account of reduction in overheads and interest costs. DLF is comfortably positioned with Rs15bn of cash reserves and low net D/E of 0.2x. With 12msf of residential launches lined up in H2FY21-FY22E, DLF is targeting to get back to its quarterly pre-Covid run rate of Rs7.5bn in H2FY21. We retain our BUY rating with a revised SOTP based target price of Rs240/share (earlier Rs209) as we roll forward to March 2022 and assume a lower cap rate of 8% (9% earlier) for the rental business. Key risks to our call are weak residential and leasing demand in India.

- Sales momentum picks up QoQ, strong launch pipeline: DLF clocked Q2FY21 net sales bookings of Rs8.5bn which includes Rs3.8bn of strata sales of Amex office tower in Gurugram. Ex-office strata sale, DLF clocked Q2FY21 sales bookings worth Rs4.7bn vs. Q1FY21 bookings of just Rs1.5bn driven by sales of 11 units worth Rs3.0bn in the super-luxury Camellias project. DLF has outlined a long-term plan to launch and develop ~35msf of projects having potential sale value of Rs360-400bn. Of this, DLF intends to launch ~12msf over the next 18 months (H2FY21-FY22E) across plots/mid-income housing/independent floors in Gurugram, Chandigarh and New Delhi in a phased manner. For H2FY21, DLF is targeting a quarterly booking run-rate of Rs7.5bn (pre-Covid levels) on the back of new launches.

- DLF's net debt flat QoQ, liquidity position comfortable: DLF's net debt (ex-DCCDL) remained flat on QoQ basis at Rs52.2bn on account of tight control on corporate overheads and reduction in interest costs. DLF (ex-DCCDL) currently has Rs15bn of cash reserves and is targeting to keep the net debt levels flat in H2FY21E.

- Rental business collections strong in offices: In Q2FY21, DCCDL achieved rental income of Rs7.2bn (up 9% QoQ). Offices, which contribute over 80% of the rental income saw strong collections of over 98% in Q2FY21 at Rs6.7bn. Mall rental income for Q2FY21 stood at Rs0.5bn (decline of 63% YoY) and DLF expects to collect ~Rs2.5bn of mall rentals in FY21 overall (expected YoY decline of 55%) as it offers more waivers in the remainder of FY21. The Cyber Park office in Gurugram (2.6msf) became operational in August 2020 and can potentially add Rs3.75bn of annualised rental income from FY22E. As per DLF's management, it has initiated the process for getting the DCCDL portfolio REIT ready in the medium term.

Shares of DLF LTD. was last trading in BSE at Rs.158.3 as compared to the previous close of Rs. 153.2. The total number of shares traded during the day was 669624 in over 6847 trades.

The stock hit an intraday high of Rs. 159.25 and intraday low of 152.6. The net turnover during the day was Rs. 104592385.

Source : Equity Bulls

Keywords