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* DLF reported bookings of INR20.4b, which was flat YoY and in line with our estimate. However, there was a sequential decline of 76% in bookings compared to the record-breaking performance in 4QFY23. This drop can be attributed to the absence of any new launches during the current quarter, with sales primarily dependent on ongoing and completed inventory.

* Sales at DLF’s ultra-luxury Camellias project revived, contributing INR5.6b to the overall sales from bookings of 13 units. Additionally, the company resumed sales at ONE-Midtown, Delhi, recording bookings worth INR6.6b.

* The company now has pending inventory of INR56b from ongoing and completed projects and it expects to launch 10msf of projects with a revenue potential of INR190b. Thus, while it has guided for INR120-130b of pre-sales in FY24, we expect the company to achieve a minimum of INR150b of pre-sales. There is a potential for upside risk, depending on the response to upcoming launch of Crest II.

* Cash flow performance – Collections grew 47% YoY but was down 18% QoQ to INR15.8b and in line with our estimate. Post construction costs and overheads, the company generated a surplus of INR6.7b, leading to an increase in cash balance to INR29.6b against a gross debt of INR30.1b.

* P&L performance – Revenue was flat YoY at INR14.2b and 11% below our estimate on account of lower recognition. EBITDA declined 4% YoY to INR4b due to 90bp reduction in margin (higher employee cost). However, lower interest costs, higher ‘other income’ and increased contribution from DCCDL (JV profit) led to 12% growth in PAT to INR5.3b.

SEZ vacancy rises by 30 bp; strong pre-leasing in non-SEZ space

* Occupancy in DCCDL’s rental portfolio reported a 100bp rise in vacancy to 89% in 1QFY24. The occupancy rate of the rentco’s 16.5msf SEZ portfolio declined to 82% from 85% in 4QFY23, while the non-SEZ occupancy rate remained stable at 94%.

* Despite that, rental income remained largely stagnant at INR10.4b, up 13% YoY. Office portfolio contributed INR8.5b to rental income, flat QoQ and up 13% YoY, while rentals from retail portfolio were down 4% QoQ to INR1.9b.

* As against the weakness in SEZ space, non SEZ space continues to witness strong leasing momentum as the company leased 1.0msf of space at its upcoming projects, Downtown Gurugram (0.7msf) and Downtown Chennai, (0.3msf) taking the total pre-leasing for 5.3msf u/c portfolio to 82%.

* We expect DCCDL’s portfolio to register a CAGR of 13% in rental income over FY23-25E to INR51b. Moreover, we expect the growth trajectory to persist for at least 12-15 years, considering the ~24msf development potential in existing assets.

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