Q1FY24 Review: DLF: Stable quarter; Mumbai foray key to watch

25 Jul 2023 , 12:37 PM

DLF reported a stable quarterly performance, reporting flat YoY sales in absence of new launches. DLF re-iterated its FY24 presales and launch guidance, both of which will be skewed towards H2. DLF has re-entered the Mumbai market and has invested in a brownfield project, however more clarity will emerge as execution ramps up. In DCCDL, performance was stable although weak SEZ demand remains a drag on overall portfolio. DLF’s balance sheet is now near net debt free, and has among the largest monetisable land bank enjoying high margins. Analysts of IIFL Capital Services NAV based valuation of Rs545/share leaves modest upside, retain BUY.

Residential – Stable quarter, strong outlook: 

DLF reported a steady quarter, pre-sales at Rs20.4bn were flat YoY in absence of new launches. Collections were up 47% YoY, driving a sharp Rs6.7bn QoQ net debt reduction, and taking the net debt to lowest ever levels at Rs0.6bn. Over FY24, DLF expects to clock in pre-sales of >Rs120bn, driven by planned launches of ~Rs190-200bn which are largely skewed towards H2FY24 – key being 3.5msf in DLF 5, 3.5msf in Sector 76/77 (Gurgaon) and 1.2msf luxury project in Chennai. Mgmt shared that demand for Camellias remains strong, expects pricing of >100,000/sqft vs >60,000/sqft now.

Rental – Muted demand for SEZ: 

DCCDL reported a marginal drop in occupancy levels QoQ, as demand for SEZ remained muted, while occupancy in Non-SEZ portfolio remained stable. Mgmt remains hopeful of govt amending the SEZ Act soon to allow partial de-notification of floors, which will aid in SEZ demand revival. For under construction assets of ~5.3msf (Non SEZ) – across Downtown Gurgaon and Chennai, there was net 1msf of leasing during Q1FY24, taking overall pre-leasing to 84%.

Re-entry in Mumbai market a significant event; retain BUY: 

DLF has announced its foray into the Mumbai market by entering into a development agreement (for 0.9msf) for a large SRA project (potential 3.5msf) in Andheri. The GDV of the project is >Rs20bn (DLF stake 51%), and has invested Rs4bn so far. Mgmt said it is testing waters and its expansion strategy will evolve with learnings from this project. Despite the recent run up, and limited upside potential, analysts of IIFL Capital Services like DLF due to its healthy balance sheet, strong cashflow outlook and well located land bank.