Strong pre-sales numbers, sharp reduction in debt and a planned slum rehabilitation project in Mumbai have kept analysts upbeat on DLF even as investors had a lukewarm response to its Q1 earnings so far.
DLF reported a presales of Rs 2,040 crore, which was flat quarter-on-quarter but down 76 percent from last year. However, analysts said it was in line with expectations.
“Due to the lack of new project launches, sales performance was driven by strong sustenance sales with all-round performance across projects,” said Biplab Debbarma, a real estate analyst at Antique Stock Broking.
DLF said its rental arm – DLF Cyber City Developers Limited – posted an income of Rs 1,040 crore, up 13 percent on-year and down 1 percent on-quarter. Net debt in Devco, the arm which develops projects, was down to Rs 57 crore on the back of a strong collection during the quarter.
Additionally, DLF announced its re-entry into the MMR (Mumbai Metropolitan Region) market with a slum rehabilitation project in Andheri. The total project size is expected to be around 35 lakh square feet. DLF has invested Rs 400 crore for the entire project in a convertible instrument which eventually will get converted to equity.
Also read: DLF may launch close to 9 lakh sq ft in Andheri West: Sources
“DLF’s re-entry into MMR augers well for the company’s long-term growth aspirations; the re-entry is a calibrated move via the partnership model and will help the company understand market dynamics well before getting into any aggressive growth plans,” said Debbarma.
Although 1QFY24 didn’t see any launches, the launch pipeline for the rest of the year remains robust with Rs 19,700 crore worth of new projects (112 lakh sq ft) to be launched in FY24 with the H2FY24 to witness the majority of them, said the company management in its earnings call.
HDFC Securities in a note said the cash position of the company is strong at Rs 3,000 crore, earmarked for growth, dividend payout and debt reduction. “Given the strong pre-sales momentum supported by price hikes, robust launch plans, and an expected increase in office occupancy levels, we maintain BUY on DLF, with a target price of Rs 504,” it said.
As of 10.30am, DLF shares traded with a gain of 0.8 percent at 497.70 on the BSE.
CLSA also said that most of the numbers were in line with its estimates, including pre-sales and rental income. It also highlighted the sharp debt reduction led by strong free cash flow generation, which is a strong sign for the stock.
Debbarma said he remains positive on DLF. He has a 'buy' rating on the stock with a target price of Rs 576 as he factors in the strong growth outlook on the residential segment. Near-term challenges in leasing SEZ annuity portfolio is key risks to his projection, he added.
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