Residential sales momentum has returned and business is more positive on future: DLF has accomplished Rs 10billion of quarterly sales momentum for two consecutive quarters, which puts it firmly on track to obtain its target of Rs 40billion for FY22. The business even indicated that it has now began taking price tag increases for its merchandise. With Rs 80 billion of inventory to be launched and a different Rs 60billion currently launched but but to be sold, Rs 40billion is not an ambitious target. With new launches planned once more, we will need to have to monitor positive money flow generation. However, the elevation of the Group CFO to the CEO function provides us more self-assurance on the money flow focus.
Commercial is nonetheless weak but we count on recovery in FY23: Like other industrial workplace spaces, DLF’s industrial workplace entity DCCDL has also been losing some occupancy and it is now (as of Q4 FY21) down to under 87% levels vs 90% in Q3. DLF has c4msf of workplace region beneath building (more than its base of 30.3msf) which will be prepared more than the next 18 months. We count on this to be a medium-term drag on the stock as new net leasing will most likely be slow in the medium term.
Investment view: We think DLF will continue to dominate the NCR residential market place provided its brand, availability of land bank and powerful balance sheet. However, momentum in sales will have to be driven by new launches, which frequently drive up debt as properly. We think the last two quarters have revived some modest- to mid-sized developers and they are now searching to launch new projects. This can potentially slow down market place share gains for the substantial branded developers. However, valuations are pricing in a fast raise in market place share and frequently share price tag functionality of the stock is driven by the movement of debt. Hence, we sustain our ‘hold’ rating.
Maintain ‘hold’ but raise target price tag to Rs 280: We tweak our earnings estimates by .3%-3% for FY22/23e to account for adjustments in launches. We introduce our FY24 estimates. We worth the business on a DCF model of project money flows. We assume a WACC of 12%, based on a threat-totally free price of 5%, such as nation inflation premium of 2.5%, equity threat premium of 5.5%, in line with our international method team’s forecast and a beta of 1.6 (all unchanged). We calculate our Mar’22 fair worth by applying a discount of 11% (unchanged) at 1 common deviation above imply (unchanged) discount to our NAV estimate of Rs 347 (earlier Rs 335). We discount it back by nine months (earlier one year) to arrive at our present fair worth target price tag of Rs 280 (earlier Rs 270). Our TP implies 9.7% downside.