DLF Q2 PAT seen down 10% at Rs 375.4 cr

Real estate firm DLF is expected to report a profit after tax of Rs 375.4 crore in the second quarter of FY12, a fall of 10% as compared to Rs 418.4 crore in the corresponding quarter of last fiscal.

Sales are likely to be flat at Rs 2,365 crore versus Rs 2,369 crore during the same period.

EBITDA is seen going up 13% to Rs 1,049 crore in the July-September quarter of FY12 versus Rs 928.9 crore in a year ago period.

EBITDA margins are expected to improve at 44.4% as against 39.2% year-on-year.

On quarter-on-quarter basis, the company's sales are likely to fall 3% while PAT is seen going up 1%.

Factors to watch out for:

Sales Volume:

Due to absence of any major launches during the quarter, sales volumes are likely to decline from 2.2m sq.ft in Q1FY12 to 2m sq.ft.

Sales volume will be led by plotted projects and in particular by the sale of plotted properties in Gurgaon

DLF are expected to continue to see sustainability in office-leasing volumes on a sequential basis

Development volumes will be led by existing projects as the company did not launch any project in Q2FY12

Plot project launch in Gurgaon in 1QFY12 continued to witness strong response and is sold completely, while response remains muted in the Indore plot project

On account of absence of launches, new sale revenue recognition shall be lower, thus leading to a sequential decline in revenues

Asset sales and likely completion in the coming quarters:

(i)                  Reports suggest DLF concluded its first asset sale at Gurgaon land ((28 acres of land)) to M3M developers at Rs 440 crore

(ii)                 Sale of the IT Park at Noida for Rs 512 crore is likely to be concluded in Q3FY12

(iii)                Planning to sell its 17.5 acres of land in NTC mill land in Central Mumbai (estimated around Rs 3000 crore)
**Had bought the land for Rs 702.2 crore in 2005

(iv)                Seeking approval from the Board of Approvals for SEZs to sell the shares of its IT SEZ in Pune
**DLF has a 70% stake in the SEZ, is in talks with PE players ((Blackstone)) to sell the land ((estimated around Rs 900 crore))
**DLF has 70% in DLF Ackruti Info Parks (Pune) Ltd and remaining stake is with Ackruti City Ltd

Post these deals go through, the company could significantly reduce its mounting debt over the coming few quarters

Do not expect meaningful debt reduction during Q2FY12:

DLF had planned to reduce its debt which stood at Rs 21,524 crore at the end of Q1FY12 by monetizing its non-core assets

Debt levels are expected to remain flat given the benefits of non core asset sales likely to flow in from Q3

Debt on the balance sheet will be the key factor, though cash from asset sales is expected to flow through only in Q3 and Q4 FY12

PAT is likely to decline with interest cost not seeing any decline on account of mounting debt which has increased continuously for nine quarters