Angel Broking neutral on DLF

Angel Broking has maintained neutral rating on DLF in its August 8, 2012 research report. According to research firm, DLF’s sales volumes to be sluggish over the coming quarters given the inventory buildup in the NCR region.

“DLF reported disappointing 1QFY2013 results as both, net sales and net profit were below our estimates. Its sales declined by 10.1% yoy and 16.0% qoq. The revenue came in at Rs 2198cr for the quarter, ie below our expectation of Rs 2,550cr. The EBITDA declined 4.% as there was an expansion in the EBITDA margin by 300bp to 48.6% during the quarter. The PAT was down 18.3% for the quarter due to a high interest cost which ate into profitability. The PAT came in at Rs 293cr during the quarter.”

“Sales booking was recorded at 1.3mn sqft down from 6.8mn sqft qoq and 2.3mn sqft yoy, primarily due to lack of new launches during the quarter. Sales activity is expected to pickup in the second half of the year. The leasing activity also remained subdued in line with the past quarter’s performance. Leased area during the quarter stood at 0.3 mn sqft (0.29mn sqft qoq and 0.73mn sqft yoy). Revenues during the quarter came in at Rs2,198cr, declining by 10.1%yoy and 16%qoq. Though revenues remained subdued, the EBITDA margin expanded by 300bp yoy to 48.6% (excluding other income). The company obtained approval for additional area, which helped it boost its revenues and margins. The EBITDA came in at Rs1067cr down 4%yoy. The interest expense was in line with expectations at Rs623cr for the quarter. The interest cost ate into the profitability with PAT coming in at Rs293cr, down from 18.3% yoy.”

“Monetization of non-core assets remains essential for the company due to its high leverage. We expect sales volumes to be sluggish over the coming quarters given the inventory buildup in the NCR region, which should impact DLF’s cash generating ability. In spite of three assets being in an advanced stage of monetization process, we expect DLF’s debt levels to remain elevated and interest expense to eat into profitability. Pickup in sales and better than expected asset monetization would be key rerating events in our view. We maintain our earnings forecast for the company and maintain our Neutral rating on the stock,” says Angle Broking research report.

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