Reduce DLF; target of Rs 220: Emkay

“DLF reported revenue of Rs 20.3bn decline of 180% YoY and 9.2% below our estimates. EBITDA at Rs 8.2bn was down 30.2% YoY and 26.4% below estimates. EBITDA margins fall by 707bps YoY and 589bps QoQ. PAT at Rs 2.6bn down 45.4%YoY and 69.6% below estimates. Adjusting the PAT of one-time Other Income, the core operation performance was worst in recent history Company attributed the lower turnover to the execution slowdown on back of transfer of operations to third party contractors, while high labour & commodity inflation lowered the EBITDA margins.”

“Company received gross cash inflow of Rs 12bn from the sale of its IT Park at Noida, IT SEZ at Pune and outstanding amount on land sale deal in Gurgaon. On expectation of meaningful debt reduction owing to same, the net debt was reduced by just Rs 1.7bn to Rs 227.6bn. Company utilized the balance mainly towards land acquisition of Rs 3.7bn, capex of Rs 0.8bn and regulatory charges of Rs 0.7bn and balance towards part payment of interest cash outflow of Rs 9.0bn which core operations failed to meet Going forward, company sees similar performance for next two quarters till its core operations revives on back of launches, interest rate cycle easing and non-core asset assets deals closes. We has anticipated and stated in our previous notes about non-performance of core operation albeit company’s move towards low ticket size and low target audience plotted development. Company did sell 3.3msf in Q3FY12 but whose value was less than Rs 8.0bn, a number which would be much higher in terms of value and customer advances if it would have been group housing. The intended new launches (discussed later) will see some revival in core operations but it will be atleast 1-2 quarter down the line.”

“We maintain our Reduce rating with TP of Rs 220. Cut our bottomline estimates by 22% / 15% for FY12E /13E. At TP, stock would trade at P/BV of 1.4x on FY13E,” says Emkay Global Financial Services research report.

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