IGI Logo

Decoding the near-term launch pipeline

To deliver 25% pre-sales CAGR over FY22-24E

Low rise dominated the launch pipeline over the last 24 months

* In FY21, DLF identified a project pipeline of 35msf across different segments to be launched in New Delhi, Gurugram, Chennai, Panchkula and Goa where it continued to hold legacy land parcels.

* Except ONE Midtown, Delhi, the new launches for DLF since FY21 have largely comprised low-rise floors/plotted developments across its value homes/luxury segments in Gurgram, Chennai and Panchkula.

* Over the last 24 months, DLF has launched ~9msf of low-rise products with sales potential of ~INR100b of which it has already sold INR76b, including sales done but yet to be booked as of Sep’22.

* The company has largely exhausted its launch pipeline in the luxury floors segment and would bank upon the success of ONE Midtown, to launch highrise luxury projects in key markets.

High-rise projects to take over the new launch baton from here on

* Starting 2HFY23, DLF’s launch pipeline of 12.5msf for the next 18 months is expected to be skewed towards high-rise projects having saleable potential of 6.5msf worth INR160b.

* High-rise projects in FY23 include the first phase of the new project at Sector 63, Gurugram (Phase 1: ~2msf), likely to be launched in 4QFY23 along with release of inventory in existing towers of ONE Midtown as well as launch of a new tower D.

* In FY24E, DLF will launch the second phase at Sector 63 (~1.5msf) and ONE Midtown (2.0msf) and a new high-rise project at Chennai (~1msf).

* Launches in independent floors include a portion (~2.0-2.5msf) of the 4.4msf expected to be launched in Panchkula and New Gurugram and the balance might be planned as high rise along with a small phase in DLF City (~0.3msf).

* Feedback from brokers suggests, response to the high-rise projects especially in Gurugram is likely to be strong as it will be the first high rise project in Gurugram after a gap of 7-8 years (Ultima in FY18 being a re-launch).

* Cumulatively, DLF will launch INR190b of projects over the next 18 months and will contribute INR50b/INR60b to pre-sales in FY23/FY24E; we now expect DLF to clock INR90b/INR110b of pre-sales in FY23/24, respectively.

* The company is working on a few more projects beyond the existing pipeline and will likely launch Crest II in DLF V in FY24E, which is not incorporated in our FY24E pre-sales yet and will likely be an upside risk to our estimates.

Commercial portfolio to witness 16% CAGR in rentals over FY22-25E

? On the DevCo side, Noida IT Park (0.8msf: 0.3msf pre-leased and 0.5msf to be leased) will start generating rent from FY24E. While the ground work on Hines JV/Goa Mall has already begun, rental timelines are beyond FY24.

? The first phase at Downtown Gurugram commenced operations in 2QFY23 with 100% pre-leasing. DLF further has 5.3msf of project under-construction across Downtown Gurugram (2.0msf) and Chennai (3.3msf), of which 1.6msf (30%) is pre-leased.

? The first phase of Chennai office blocks (2msf) will be completed in FY24E and the balance area, which is leased to Standard Chartered, is scheduled to be completed by FY25E. Similarly, the second phase of Downtown, Gurugram is expected to be completed by 2HFY25E.

? We expect DLF Cyber City Developers Limited (DCCDL)’s commercial portfolio to register 16% CAGR in rentals to INR52b over FY22-25 and given the completion timelines of key assets, the portfolio will continue to deliver consistent growth beyond FY25E.

Valuation and view

* We raise our FY23E/FY24E pre-sales by 4%/22%, respectively, to incorporate higher realizations and anticipated stronger responses to new launches in FY24E.

* We roll-forward the valuation for commercial assets to Sep’24E and incorporate higher blended rentals for the balance potential in Downtown Gurugram due to planned development of the 3-4msf mall. Thus, we raise our SOTP-based TP to INR425 (from INR380), implying 7% upside potential.

* While we remain confident on DLF’s growth trajectory in both its residential and commercial businesses, a large part of it appears to be already priced in. Thus, the implied value of land remains the only key metric for any further upside on the stock.

* At current valuations, the surplus land in DLF and DCCDL is valued at INR522b, which is closer to our estimated value of INR545b assuming 19 years of development timeline for DLF’s 151msf land and 13 years for DCCDL’s 25msf land, which is fair in our view. We reiterate our Neutral rating on the stock.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer