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Solid CF aided by deliveries and launches ahead

Our view

DLF achieved strong presales of Rs22.3bn in Q2FY24 backed by the strong sales for ‘The Camellias’ DLF5, Gurugram (Rs7.2bn); New Product (Rs9.9bn); Grand Enclave, Panipat (Rs1.6bn) with steady sales of other projects and reiterated presales guidance of +Rs130bn for FY24E. Company collected Rs23.6bn for Q2FY24. DLF plans to enter Mumbai through the SRA project under the JDA model. Project will have a total saleable area of 3-3.5msf in Andheri-West, of which the company plans to launch ~0.9msf in next 9-12months. Non SEZ office assets are recovering fast with incremental leasing traction and now SEZ portfolio also started showing traction with occupancy inching up to 85% (82% in Q1FY24). DLF is expected to generate free cashflow of ~Rs65bn over FY24-25E

We have aligned our average price realization assumption to the recent booking trend witnessed. Hence our Revenue/EBITDA/PAT estimates for FY24E moved up by 15%/27%/15% and for FY25 is up by 17%/27%/15% respectively. We valued residential business now at Rs.183.6bn and believe DCCDL, with its 39.6msf operational portfolio and ~5.3msf under-construction projects, is on track to achieve Rs48bn NOI by FY25 hence valued DCCDL at Rs249.8bn (DLF’s share & net of debt). DLF has shown capability of monetizing its land efficiently (in last 24months, launched ~18msf and achieved ~15.8msf presales) thereby we expect DLF to monetize 146msf with good pace too; valued at Rs487/share. DLF has turned net cash positive to Rs1420mn and is expected to maintain it. Sustained demand in residential and pick up in the leasing (incld. SEZ), deleveraged B/S along with DLF’s long standing track record gives us confidence. Hence upgrade stock to BUY rating with TP of Rs678/share (WACC 11.5%, Office Cap Rate 8.5%, Retail Cap rate 7.25%)

Result Highlights:

* Consolidated revenue for the quarter reported at Rs13,477mn (-5.3% q/q & 3.5% y/y), guided by the sales in The Camellias.

* EBITDA came in at Rs4,626mn (16.8% q/q & 5.9% y/y) lower by 15.8% from our estimate due to product mix change. And margin reported at 34.3% up by 649bps q/q & 79bps y/y.

* Consolidated Adjusted PAT reported at Rs6,230mn up by 18.2% q/q & 30.6% y/y (16.2% below YSECe) due to overall lower revenue recognition. PAT margin came in at 46.2% (920bps q/q & 960bps y/y)

* DLF turned Net cash to Rs1420mn in a quarter (Q1FY24: Rs570mn) and at portfolio level cost of debt stood at 8.12% (8.19% for Q1FY24 exit).

* Company declared dividend of Rs4/share for share of face value Rs2/share which resulted in Rs9.9bn outflow.

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