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All eyes on Delhi residential launch

DLF has announced the launch of its luxury residential project “ONE Midtown” in New Delhi consisting of over 2msf of saleable area across 913 units with a total potential sale value of Rs40bn (50:50 JV with GIC Singapore). As per our channel checks, we expect the project to achieve sales of 60-80% of the launched inventory in Q4FY22 or sale value of Rs12-16bn (we assume that 50% of overall area will be released for sale). DLF has achieved Rs25bn of sales bookings in H1FY22 vs. FY22 guidance of Rs40bn. With estimated Rs11bn of bookings in Q3FY22 and contribution from this new launch, we expect the company to clock FY22 sales bookings of Rs54bn and exceed its FY22 guidance. We maintain our ADD rating with an unchanged Mar’22 SoTP based target price of Rs434/share. Key risks are weakness in office leasing and slowdown in residential demand.

* DLF has announced launch of its premium housing project in New Delhi: DLF has announced the launch of its luxury residential project called “ONE Midtown” located at Shivaji Marg, Moti Nagar in New Delhi. This new phase consists of 913 units spread over 2msf of saleable area across 2/3/4 BHK units having a total potential sale value of over Rs40bn (average realisation of >Rs20,000/psf). This project is a 50:50 JV with GIC Singapore and is located on the same land parcel where DLF’s Capital Greens Phase I, II and III consisting of over 2,700 units has been delivered. The land parcel has further saleable area potential of ~6msf.

* Channel checks indicate strong initial response for this project: New Delhi is a supply constrained market with limited land parcels and DLF has already delivered earlier phases in this same project where resale prices hover between Rs20,000- 23,000/psf on saleable area basis. As per our channel checks, with ticket sizes of Rs30-60mn for the various units at a base selling price of ~Rs20,000/psf, initial response has been strong and we expect the project to achieve sales of at least 60- 80% of the launched inventory in Q4FY22 or sale value of Rs12-16bn (we assume that 50% of overall area will be released for launch having potential sale value of Rs20bn). We estimate construction costs (ex-land) to range between Rs5,000- 6,000/psf, similar to the cost for Crest in DLF Phase V, Gurugram.

* DLF may comfortably exceed FY22 sales guidance of Rs40bn: The company had given FY22 sales booking guidance of Rs40bn (Rs10bn/quarter) from the development business and has achieved H1FY22 bookings of Rs25bn. We estimate Rs11bn of bookings in Q3FY22 and with the Midtown launch in Jan’22, we estimate Q4FY22 bookings of Rs18bn and Rs54bn for FY22.

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