YES Securities' research report on DLF
DLF achieved strong presales of 1.55msf translating in sales value of Rs25.1bn in Q3FY23 backed by the strong presales for ‘The Grove’ DLF5, Gurugram (Rs15.7bn), DLF Valley Garden, Panchkula (Rs5.4bn) and steady sales for ’The Camellias’ (Rs1.8bn) hence management remain confident to achieve/surpass Rs80bn guidance for FY23E (Rs66bn clocked in 9MFY23). Company collected Rs14bn for Q3FY23. ‘The Grove’ luxury offering in DLF5, Gurugram with total area of ~0.85msf sold out in just 2 quarters of its launch. Operating margins for DLF came in at 32% and expected to trend north of 35% in coming years as new projects added in the last few years are margin accretive with gross margins +55%. Office assets are recovering with physical occupancies increasing MoM and currently stood over 60% at portfolio level. We valued residential business at Rs.152.6bn and believe DCCDL, with its 39.6msf operational portfolio and ~5.3msf under-construction projects, is on track to achieve Rs55bn NOI by FY25 hence valued DCCDL at Rs290.6bn (DLF’s share & net of debt). DLF has shown capability of monetizing its land efficiently (in last 24months, launched ~12msf and achieved ~9msf presales) thereby we expect DLF to monetize 152msf with good pace too; valued at Rs383/share.
Outlook
DLF has maintained its D/E below 0.2x since FY20 and is expected to remain low. Sustained demand in residential and pick up in the leasing, deleveraged B/S along with DLF’s long standing track record gives us confidence. Hence maintain BUY rating with TP of Rs568/share (WACC 11.5%, Office Cap Rate 8.5%, Retail Cap rate 7.25%)
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