Accumulate DLF; target of Rs 229: KRChoksey

KRChoksey is bullish on DLF and has recommended accumulate rating on the stock with a target of Rs 229 in its November 15, 2012 research report.

“DLF posted its Q2FY13 results below our expectations with a top-line of Rs2,040cr, a de-growth of 19% y-o-y and 7% q-o-q while EBIDTA income was down by 36% y-o-y, consequently margins also declined sequentially as well as y-o-y basis, primarily due to higher operating cost. Adjusted net profit declined by 68% y-o-y while margins declined 880bps y-o-y on the back of higher interest expenses during the quarter.”

“Management is continuously working to monetize the non-core assets. During 1H FY13, it sold assets worth of Rs929cr (including Rs560cr in Q2). In addition, it expects to receive further cash on recent deal of NTC mills during Q3FY13. Furthermore, it is at the initial stage of selling wind energy business and Aman resort, which it believes to be completed during current fiscal. Gross debt stands at Rs24,615cr while the cash balance stands at Rs1,395cr in Q2FY13. The company maintained its target of disinvestment of Rs5,000cr of non-core assets during FY13 to repay significant debt portion. During 2HFY13, it expects to execute the projects at a faster pace and planning to launch new high residential projects (9-10mn sqft). We believe the new launches coupled with easing pressure on interest burden and ongoing festive season to fuel the growth in upcoming months. In addition, efforts of trimming debt will give a cushion to the company to improve financial health and performance, going forward.”

“We expect company to witness sales volume of 13mn sqft & 13.7mn sqft and net leasing of ~3mn sqft & 4mn sqft in FY13 & FY14, respectively. Cash flow generation by way of monetization of non-core assets and strategy of launching high degree luxuries projects and anticipation of improvement in real estate market on account of easing interest rates to drive the performance in 2HFY13. Considering all these factors, we upgrade our rating to ACCUMULATE with the target price of Rs229/share,” says KRChoksey research report.

FIIs holding more than 30% in Indian cos

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