Neutral DLF; target of Rs 455: Motilal Oswal

Motilal Oswal's research report on DLF

Housing segment continues to witness strong demand, supported by tailwinds from fundamental demand drivers. Consolidation among larger and credible brands continues to be a key trend in the housing segment, primarily driven by rising confidence toward developers with strong execution legacy. In FY23, DLF’s pre-sales doubled YoY to INR155b, driven by a strong response to a new luxury project launched in Gurugram. Its identified launch pipeline will help the company sustain the momentum.  Expansion of new global captives, R&D and the technology sector will boost demand for office space. In Retail, there has been a significant rebound with improved footfalls. This resurgence is primarily supported by a recovery in the luxury segment. DLF maintains a positive outlook on the rental business and is consequently deploying capital to grow the office portfolio (developing 5.3msf across Gurugram and Chennai). Given a recovery in the retail segment and consumption trends in the country, DLF has also initiated the development of new sets of malls across geographies, with an aim of doubling its retail presence in the next 4-5 years. DLF continue to strengthen its sales, CRM and project execution teams, and its upgraded ERP system has significantly enhanced the company’s digital capabilities.

Outlook

The current valuation indicates that the company’s 146msf land in DLF (DevCo.) and 24msf land in DCCDL (RentCo.) are valued at INR620b. This valuation incorporates a ~15 years of monetization timeline for the land bank, which we believe is fair. We value the land at ~INR530b, implying that there is limited upside potential from the current valuation. Maintain NEUTRAL with a TP of INR455.