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Resilient performance

DLF achieved strong operational improvement in FY21 across segments with net residential sales bookings growing 24% YoY to Rs30.8bn and DCCDL clocking flattish rental income of Rs30.3bn in spite of a 7% YoY fall in office occupancies and mall rental waivers. While the second Covid wave has impacted Q1FY22 operations, with 8.3msf of residential launches lined up in FY22E, DLF is targeting annual sales bookings of at least Rs40bn in FY22E. We expect DCCDL to clock rental EBITDA of Rs35.6bn in FY22E and Rs 40.7bn in FY23E. We revise our FY22E NAV based target price on DLF to Rs339/share (Rs303 earlier) building in faster pace of devco sales and land bank valuation adjustments. However, we cut our rating to ADD from Buy post the recent run up in stock price. Key risks to our rating are continued weakness in office leasing and slowdown in residential demand.

Rental business delivers resilient FY21 performance:

DCCDL delivered a resilient FY21 performance with rental EBITDA of Rs30.3bn (flat YoY) even as a 7% YoY fall in office portfolio occupancy to 88% on account of lease expiries/exits and mall rental waivers of over 50% impacted earnings. In FY22, of the scheduled 1.6msf of office lease expiries, the company expects to re-lease 75-80% space and occupancy to further dip by 1-2%. However, it remains confident of a strong leasing pickup from FY23E and has guided for an exit rental income of Rs37bn by Mar’22 and Rs43bn by Mar’23. We model for DCCDL rental EBITDA of Rs35.6bn in FY22E and Rs40.7bn in FY23E. DCCDL continues with its plans to keep itself ready for a possible REIT listing in the medium term.

Sales momentum sustains:

DLF clocked Q4FY21 net sales bookings of Rs10.6bn (Rs10.2bn in Q3FY21) which resulted in FY21 bookings worth Rs30.8bn vs. Rs24.9bn in FY20. The quarter’s sales were driven by Camellias (12 units sold worth Rs3.2bn), Rs2.7bn from new Gurugram and Rs4.6bn from new product launches. The company intends to launch new projects of 8.3msf in FY22E and is targeting an annual booking run-rate of at least Rs40bn vs. pre-Covid levels of Rs20-25bn on the back of new launches along with completed inventory worth Rs56.2bn as of Mar’21

DLF’s net debt declines QoQ, liquidity position comfortable:

DLF’s net debt (exDCCDL) declined QoQ by Rs2.2bn to Rs48.9bn and reduced by Rs3.8bn overall in FY21. The company is targeting further reduction in debt levels over FY22-23E on the back of improved operating surplus from devco business and a structural reduction in cash overheads (down 41% YoY in FY21) and lower interest costs

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