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Muted bookings in 4Q; pipeline remains strong

Targeting INR170b bookings in FY25

* DLF witnessed moderation in pre-sales to INR14.6b in 4QFY24, down 83% YoY/84% QoQ (48% below estimate) due to the lack of key project launches. In FY24, the company achieved bookings of INR148b, flat YoY.

* The management plans to launch INR360b worth of projects across the super luxury/premium segments in FY25 and has guided for INR170b of bookings. Moreover, the company has identified a pipeline of over INR950b for the next three-four years. Hence, we expect DLF to report a 25% CAGR in pre-sales over FY24-26 to INR230b.

* Cash flow performance – Collections increased 14% YoY to INR22b, while OCF was flat at INR11b due to higher construction spending. In FY24, DLF collected INR83b and generated OCF of INR42b.

* P&L performance – 4Q revenue came in at INR21b, up 47% YoY (in line). EBITDA increased 89% YoY to INR7.5b (in line) as margin expanded 800bp to 35%. DLF reported PAT of INR9.2b, up 62% YoY and 11% above our estimate, largely driven by higher other income.

DCCDL: Rental run rate to ramp up to INR60b by FY25 end

* Rental income in DCCDL’s commercial portfolio increased by 7% YoY to INR11b, driven by a 13% rise in retail income. Office rentals grew 5% YoY. In FY24, the company earned rental income of INR43b, up 9% YoY, It expects rental income to ramp up to INR60b by FY25 end.

* Occupancy in the non-SEZ portfolio stood at 97%. In SEZ assets, occupancy inched up to 86% from 84% in 3Q. The overall occupancy stood at 92% in DCCDL’s office portfolio and 97% in its rental portfolio.

* Rental income for two towers (2.3msf) at Downtown Chennai will ramp up from 1QFY25 and it will ramp up for the pre-leased Standard Chartered tower (1msf) from 1QFY26. Similarly, tower 4 at Downtown Gurugram will also contribute to rentals from 1QFY26.

Key takeaways from the management interaction

* Launches: The pipeline has increased to INR360b (vs. INR295b in 3QFY24) and includes the 2 nd phase of Privana (already launched in 1QFY25), Goa (2Q), a super luxury project in DLF 5 (3Q) and the 3 rd phase of Privana, along with the Mumbai project in 4QFY25.

* Land acquisition: The recently acquired land is in Sector 61, Gurugram, where the company did not have much presence, except for the Arbour project. Moreover, the land will cost the company less than INR2500/sft, which would make the project very profitable. The company is not evaluating the Dwarka expressway (Gurugram) market.

* The new project in Mumbai has a large development potential of over 4msf; hence, there is no immediate need for new acquisition.

* Cash flow: The company aims to grow collections by 15% in FY25. It has surplus cash of INR20b (excluding INR40b locked in RERA escrow), of which INR10b will be utilized for debt repayment.

Valuation and view: Growth trajectory intact but already priced in

* DLF’s vast land reserves continue to offer growth visibility. However, our assumption of a 12-13-year monetization timeline for its remaining 160msf of land bank (including TOD potential) adequately incorporates this growth.

* We estimate an 8-10% CAGR in prices across its key markets of Gurugram, New Gurugram, Delhi, and Chandigarh. Based on the above assumptions, we value the land at INR1109b. The current valuation already implies INR1162b of value for its land, indicating limited upside potential. We Maintain Neutral stance with TP of INR850.

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