Buy DLF; target Rs 310: Emkay

Emkay Global Financial Services is bullish on DLF and has recommended buy rating on the stock with a target price of Rs 310 in its February 18, 2013 research report.

"DLF's Q3FY13 results were much below expectations as company accounted its increase in construction budget as we were expecting same in Q4FY13 results. Company's changed accounting policy with land cost no longer being considered for threshold level and higher costs provisioning, led to lower revenue under Percentage Completion Method. Also company has already provided for impairment of Aman Resorts sale deal which will be concluded in Q4FY13. All put together, the revenue is reported lower by Rs 2bn and PBT by Rs 6.3bn. Net debt increased marginally by Rs 1.2bn on Rs 21.2bn reported post NTC Mill Land cash inflows. Operating cashflow for the quarter stood at Rs 2bn.

As the divestment of non-core assets nearing to end with only part of wind power business is awaited, the focus will now shift to core business revival which is cash guzzler. DLF intends to correct the same with much awaited high value launches in New Gurgaon and Gurgaon in the short term and higher rental income and reduced interest cost over medium to long term. Also, with large tickets on-going projects in Phase V and New Gurgaon are nearing completion the cashflow gap from lower collections and higher spending with come to an end. Mgmt. expects to be operating cash neutral in FY14 and see some surplus in FY15 onwards.

Wew upgrade our target price to Rs 310 / and our rating from Accumulate to Buy with upgrade in rating considering improved visibility in the higher ticket launches in Gurgaon and New Gurgaon. Also with its net debt reduction coming from divestment and equity dilution, we believe the interest cost reduction will boost the cash generation further. We have taken the dilution of equity capital at Rs 250/ share in our estimation. The significant change in PAT for FY13E and FY14E is due to change in accounting policy," says Emkay Global Financial Services research report.

FIIs holding more than 30% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More