DLF’s new sales came in at Rs 10.1 bn in Q1FY22 (up 567% YoY, down 4% QoQ) in spite of the second wave this was driven by healthier demand for independent floors. Rentals (DLF + DCCDL), nevertheless, slid to ~Rs 7.8 bn (~Rs 9. bn in Q4FY21). Cash flow remained healthier, major to debt reduction at Devco. The firm is ramping up its launch pipeline (~8.3msf target launches in FY22) maintaining in thoughts the powerful housing demand.
Pre-sales trajectory will be a crucial stock catalyst, in our view. Improving sales momentum compels us to revise up our TP to Rs 403 (Rs 365 earlier). We keep earnings estimates for the erstwhile merged entity and Buy on the stock.
Resilience in difficult occasions: Net sales have been aided by: i) ~Rs 3.3 bn sales in Camellias (~Rs 3 bn in Q4FY21) ii) ~Rs 5.4 bn worth of new merchandise (independent floors) sold (~Rs 4.6 bn in Q4FY21) and iii) ~Rs 1 bn in sales in National Devco. Mgmt indicated that demand remains healthier across cost points/geographies. It has taken cost hike upwards of 20% in particular projects. DCCDL’s rentals came in at Rs 7.7 bn (Rs 8.4 bn in Q4FY21). Enquiries are choosing up and management expects leasing to boost in H2FY22. Cash flow enhanced at Devco consequently, net debt declined by Rs 1.4 bn QoQ (net D/E at .13x).
Robust launch trajectory to spur sales: DLF is stepping up launches to advantage from the powerful housing demand. It plans to launch ~35msf of projects–8.3msf in FY22, 6.4msf in FY23, 7.2msf in FY24 and balance beyond FY24. These launches will be spread across segments (luxury, mid-earnings, industrial) and geographies. We think these launches will uplift the sales trajectory.
Outlook: Launches key– The uptick in pre-sales bodes properly for DLF. We think launches/sales trajectory going ahead will be crucial stock catalyst. We keep ‘BUY/SN’.