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Noteworthy growth trajectory; more to come

DLF Limited continues to show a steady growth trajectory on the booking values front led by traction across new launches (89% of 3QFY23 sales) and completed / under-construction inventory. The residential business performed well with INR 25.07bn of bookings (+24% YoY; +22% QoQ) led by new launches at DLF Phase V, Gurgaon (INR 15.7bn) and DLF Valley, Panchkula (INR 5.4bn). For FY23, DLF remains well on track to exceed INR 80bn on account of large planned launches (INR 80bn) and completed unsold inventory (INR 71.4bn). DCCDL continued to exhibit stable performance (+1% QoQ EBITDA growth; INR 10.61bn quarterly EBITDA run rate) and has multiple upcoming development in the coming years along with the optionality of a REIT listing. We continue to like DLF’s strong market positioning in a fastrebounding Delhi NCR market, and as the cycle progresses further, DLF with its steady annuity cash flows and fully paid-up land banks remains extremely well placed to scale up across segments. DLF remains our preferred pick in the real estate space. We maintain a BUY rating with a Sep’23 TP of INR 465 (implying 32% upside).

* 89% of the sales led by new launches; large planned launches in 4QFY23: In 3QFY23, DLF achieved sales booking of INR 25.07bn (+24% YoY; +22% QoQ) largely backed by a combination of new products (INR 22.35bn; 89% of booking value), The Grove, DLF Phase V (INR 15.7bn; average realization of INR 22,000psf), DLF Valley Garden, Panchkula (INR 5.4bn; average realization of INR 8,400psf), and others (INR 1.27bn). Camellias had sustenance sales of INR 1.79bn and is now left with INR 16.61bn of RTM inventory. DLF presently has an unsold inventory value of INR 71.4bn (INR 30.04bn completed inventory + INR 41.37bn launched products) and is likely to add products worth INR 80bn in 4QFY23 across Gurugram taking it to INR 151.4bn. Over 4QFY23 / FY24, DLF plans to launch 3.1msf / 9.4msf respectively and is, therefore, likely to further accelerate sales momentum

* DCCDL on course for INR 49bn of exit rental by FY24: DCCDL’s office rentals came in at INR 8.13bn (+14% YoY; +1% QoQ) while retail has rebounded strongly to INR 1.9bn (+19% YoY; +1% QoQ). EBITDA for DCCDL came in at INR 10.61bn (+16% YoY: +1% QoQ) and has potential of heading towards INR 49bnby FY24 end as new developments across Chennai (3.4msf total leasable area; 54% pre-leased) and Gurgaon (2.0msf; 35% pre-leased). Occupancies in the office segment remained flat at 89% (89% in 2QFY23) while occupancy in retail segment stood firm at 98%. Planning for the upcoming retail destination, Mall of India, Gurugram is in advanced stages.

* Reported financials: Revenue recognised increased to INR 14.95bn in 3QFY23 (down 4% YoY; +15% QoQ) while EBITDA came in at INR 4.77bn (down 8% YoY; +9% QoQ) and PAT incl. extraordinary items was INR 5.19bn (+37% YoY; +9% QoQ). EBITDA margin was 31.9% (down 172bps YoY; down 161bps QoQ) while gross margin came in at 58.7% (+581bps YoY; down 112bps QoQ).

* Maintain ‘BUY’; Sep’23 TP of INR 465: We tweak estimates and maintain a BUY Rating with a Sep’23 TP of INR 465 (implying 32% upside).

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