DLF numbers look absolutely fabulous

DLF numbers look absolutely fabulous, Rs 1,500 cr of net profit and Rs 3,100 cr of revenues is above our expectations. Now DLF holds the promise of going even high from here looking at those consolidated numbers because if they deliver Rs 1,500 cr and you just annualize those numbers they are at Rs 6,000 cr and having seen this quarters delivery you would almost expect that the company will deliver some amount of growth QoQ and the number could be even up close to Rs 7,000 cr. 

Rs 6,000- 7,000 cr profits for the full year would work out to something in excess of Rs 40 EPS and if the company can deliver anything close to that, its trading at 16 times and that is not a rich P/E multiple for a stock of the stature of DLF.

The numbers are better than our expectations I think they now raise the hopes of the company going and delivering well over Rs 6,000 cr of net profit for the full year and delivering well over USD 3 billion ---(here he initially says delivering well over 12 and then says USD 3 billion) of sales for the full year and in that light I think its market cap atleast on a P/E basis can be justified. I have no doubt the stock even if it corrects now because there are lot of people who have built up positions before the results may actually move on to higher levels because this is a very strong set of numbers which the company has delivered.

The company has not made too many projections and they are sort of reticent about giving future guidance but in all our informal discussions its been loosely indicated that they will hold an operating margin in the vicinity of 50-60% and the 50% you are talking about is the net profit margin so do deliver a net margin of 50%, I would imagine that their operating margins are Northwards of 60% and even if there is some kind of cooling off of property prices and margins come down there is nothing wrong with operating margin profile of 45-50% even if they come off from 60%.

But your point is well taken that if there is any kind of cooling down of property prices whether the resultant erosion of operating margins can be very sharp and that is the question we will ask the management in the light of the fact that a lot of their purchases of property are happening at current prices. It is easy to deliver a 60% margin on historical land bank because the property prices have escalated sharply.

DLF just announced a Rs 6,000 cr acquisition in Dwarka yesterday and so on these kind of new purchases can they deliver on execution 50% plus operating margins, is the question which the market will have to grapple with.

One can keep on being skeptical but the hard fact is they have delivered Rs 3,000 cr of sales this quarter and they have delivered Rs 1,500 cr of net profit and those are staggering numbers, so I think they seem on course to deliver very strong numbers which can justify their market cap staying around these levels if not building on these levels.

This quarters numbers hold out a lot of hope for the rest of the year and for investors of DLF who are hoping that the market cap sticks here and builds on it.