Buy DLF; tgt Rs 672: Emkay

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Emkay Research has maintained buy rating on DLF with price target of Rs 672 in its report dated 1st August, 2008.

"DLF reported results which were below our expectation. Revenue and net profit for the quarter stood at Rs 38.1 billion and Rs 18.6 billion respectively (against our estimates of Rs 39.6 billion and Rs 22.5 billion). Revenue from DAL and Non-DAL were at Rs 15.5 billion and Rs 22.8 billion respectively. EBITDA increased by 6.4% to Rs 23.4 billion as EBITDA margins declined from 71.7% in Q1FY08 to 61.5% in Q1FY09. Decline in the margins is primarily attributed to higher non-DAL revenue (mid-housing and retail segment) which has lower margins. PAT increased by 23% to Rs 18.6 billion as effective tax rate was at 16.6% as compared to 28.4% in Q1FY08. Receivables from DAL have increased from Rs 19.4 billion in Q4FY08 to Rs 33.8 billion in Q1FY09, 6 months of revenues. During the quarter DLF received Rs 1.1 billion from DAL as advances for the project under construction. We shall keep a close a close watch on receivables from DAL as this would negatively impact the cash flow of the company if the receivables further increases". 

Valuation: 

"We expect the company to report revenue of Rs 206.4 billion in FY09 and Rs 312.9 billion in FY10. Net profit for FY09 and FY10 is estimated to be Rs 104.5 billion and Rs 146 billion respectively. Our DCF based NAV stands at Rs 840 and maintain our BUY rating with target price of Rs 672".

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