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Robust Resi. sales; Recovering annuity biz & fast land monetization levers for next leg of growth

Our view

DLF has surpassed its presales guidance of Rs40bn for FY22E in first nine months of FY22 and revised its guidance upward to Rs60-65bn. DLF took price hikes across all its project portfolio, hence revised expected cashflow from 35msf ongoing and launch pipeline by 17% to Rs470bn. With only 30units remaining in Camellias, DLF plans to launch another project in DLF5 which is under design/approval stage and expected to be announced in next 6-12months. We valued residential business at Rs.163.8bn. Due to pandemic, commercial assets witnessed slowdown which now showing signs of recovery as vacancies trending down for DLF (13% from 14% last qtr.) as leasing activity picked up, additionally malls rentals too stabilized. We believe with 39.1msf portfolio, DCCDL is on track to achieve NOI of Rs55bn by FY25 and valued DCCDL at Rs366.7bn (net of of debt). Most importantly DLF has shown capability of monetizing its land bank faster and efficiently in last decade so we expect DLF to monetize land bank of 152msf with good pace too, valued at Rs383/share. DLF continuously maintaining its D/E below 0.2x since FY20 and we expect it to remain low which allows DLF to tap the opportunity whenever required. Robust demand in residential and pick up in the leasing, deleveraged B/S along with DLF’s long standing track record gives us confidence. Hence maintain BUY rating with TP of Rs602/share (WACC 10%, Office Cap Rate 7.5%, Retail Cap rate 6.25%).

Result Highlights: DLF (excluding DCCDL)

* DLF recorded presales of ~1.2msf (-14.3% q/q & 33.3% y/y) in Q3FY22 which translates in Rs20.2bn, an growth of 33% q/q and 97% y/y guided by the robust sales in super luxury project Camelllias of Rs5.8bn, One Midtown (DLF-GIC JV) of Rs702bn and sustained sales in new product (independent floors) of Rs7bn.

* DLF collected Rs12.8bn (Rs12.2bn from resi biz and Rs610mn annuity) lower by 11.5% q/q while up by 84.8% y/y.

* DLF reported revenue of Rs15497mn higher by 4.6%q/q and 0.4% y/y (YSEC est. Rs13745mn).

* Reported EBITDA of Rs5213mn higher by 13.8% q/q and 4.5% y/y with healthy operating margins of 33.6% (270bps q/q & 130bps y/y).

* PAT came in at Rs3795mn lower by 15.9% y/y (flat q/q) due to impairment provision for Mumbai JV of Rs2244mn adjusting for it, Adj.PAT up by 59.4%q/q and 33.9%y/y to Rs6039mn.

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