Neutral DLF; target of Rs 375: Motilal Oswal

Motilal Oswal's research report on DLF

Sales bookings grew by 2.6x YoY to INR27b (est. INR24b) in 4QFY22. It ended FY22 on a high, with the best ever pre-sales of INR73b (up 136% YoY). DLF received a strong response to 6msf of launches in FY22. The same contributed 63% to total sales, while its Ultra-Luxury Camellias project saw bookings worth INR26b (77 units, 35% of the total). DLF plans to launch 7.6msf/9.2msf of projects in FY23/FY24, which indicates a continuation in the growth momentum. We expect an 8% CAGR in presales to INR85b over FY22-24. While collections remained flat QoQ at INR13b, higher construction costs and overheads led to a decline in surplus cash flows to INR5.4b v/s INR7.6b in 3QFY22. Debt in DLF’s Residential segment declined further to INR27b.

Outlook

We incorporate this uncertainty, with a higher land development timeline, to average 21 years from 13 years earlier. We also raise our WACC to incorporate a higher risk free rate of 7.5%. We have lowered our TP to INR375 per share, implying a 15% upside. We maintain our neutral rating on the stock.

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