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Our view and valuation: On track to achieve guidance of Rs40bn annual residential sales amid covid-19 restrictions

* DLF has delivered strong pre-sales of Rs10.04bn amid covid-19 restrictions (Presales upwards of Rs10bn for consecutive 4qtrs) additionally had taken price hikes in most of projects/subsequent phases clearly indicates pent up demand in market and DLF’s brand acceptability. Higher prices realization drives increase of land prices in the micro-market of DLF presence, hence we revalued land upwards considering 15-20% price increase in NCR and arrived Rs184/share.

* On the back of consolidation in sector we believe DLF is predominant player with decades of track record in NCR market which will allow it to monetise inventory faster at better price point. For ongoing/under-construction projects we have accommodated price hikes and shorten life cycle of projects (independent floor & Camellias) resulting in faster, higher net cashflow, hence valued residential business at Rs168bn translating in Rs68/share.

* Rental arm DCCDL, has 39.1msf portfolio which is expected to cross rentals of Rs40bn by FY23 and can generate NOI of Rs52bn by FY24 with Downtown Gurgaon, & Downtown Chennai getting operational. We valued DCCDL (DLF’s share) at Rs360.3bn (net of DCCDL debt) translating in Rs146/share. (WACC 10%, Office Cap rate 7.5% and retail Cap rate 6.25%). We arrived SoTP based NAV of Rs405/share hence maintain ‘BUY’ on stock.

Result Highlights:

* DLF delivered strong pre-sales in the quarter at Rs10.14bn (-4%QoQ/567% YoY) and collections at Rs6.19bn (-23%QoQ/97%YoY).

* New product sales (independent floors) drives the sales contributing 53% of total sales and reported Rs5.42bn in 1QFY22 (17% QoQ). DLF consistently achieving double digit Camellias unit sales (value: Rs3.3bn) from last 4 consecutive quarters and total DLF5 reported Rs3.52bn pre-sales (10%QoQ/324%YoY).

* Posted topline of Rs11.4bn (-33%QoQ/92%YoY and 22.5%YSEC est.), EBITDA of Rs3.95bn (-13%QoQ and 22.3%YSEC est.) and PAT of Rs3.4bn (-30%QoQ and - 11%YSEC est.).

* Declared dividend of Rs2/share (100%) on current face value of Rs2/share.

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