Buy DLF; target of Rs 258: HDFC Securities


HDFC Securities’ research report on DLF

Whilst 4QFY19 Revenue/ EBITDA came in 16/15% ahead of our estimate, APAT was lower by 13%. Revenue/APAT was higher by Rs 18.3/4.4bn on account of IND AS 115. DLF achieved Rs 6.5bn of net pre-sales during 4QFY19. Overall FY19 pre-sales stood at Rs 24.4bn (+144% YoY). DLF has guided Rs 27bn pre-sales for FY20E, which will be contributed by Phase V – Rs 8bn, Ultima – Rs 7bn, built to suit ROG – Rs 3.5bn and National Devco rest. 4QFY19/FY19 net leasing stood at 0.37/1.46mn sqft. DCCDL FY19 rental income came in at Rs 26.2bn. With the transfer of Mall of Noida, Saket and Horizon to DCCDL, cumulative rental addition will be Rs 4.5bn. Further, new assets Cyber Park and Chennai IT SEZ will add Rs 4.5bn (2HFY20E). This shall result in FY20E exit rental of Rs 35.2bn. DLF will add ~9-10mn sqft of rental assets over next 4-5yrs with Rs 45bn construction outlay. This will be met by DCCDL’s internal accruals. DLF Dev Co. net debt to reduce to Rs 22.5bn by 1QFY20, post DLF promoter fund infusion of Rs 22.5bn. DLF incurs about Rs 10bn towards interest on DCCDL liability. With asset transfer to DCCDL this will no longer hit DLF. We expect net interest expenses to reduce from Rs 5.5bn/qtr to Rs 0.8bn/qtr by 3QFY20E.


We maintain BUY post an encouraging quarter. Our SOTP-based TP has reduced to Rs 258 (vs Rs 264 earlier). We have increased our FY20/21E EPS by 19.8/50.2%, led by debt rationalization post QIP, promoter fund infusion and reduction inDCCDL dues post 2HFY20E.

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