1 August 2014
1QFY15 Results Update | Sector: Real Estate
DLF
BSE SENSEX
25,895
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,721
DLFU IN
1,781.6
353.5/5.8
243/120
-10/18/-1
CMP: INR198
TP: INR252
Buy
Financials & Valuation (INR m)
Y/E March 2015E
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2016E
2017E
87,309 92,027 107,645
29,445 71,922 87,137
7,241
4.1
12.1
2.0
4.5
48.8
1.2
10,471 18,222
5.9
44.6
169.3
16.2
12.7
33.7
1.2
10.2
74.0
177.3
19.6
15.3
19.4
1.1
BV/Sh (INR) 165.8
P&L beat, margin bounce back; lower interest, tax boosts PAT:
DLF has
reported 1QFY15 EBITDA at INR7.4b (v/s est of INR5.7b) on the back of sharp
uptick in margin to 43% (v/s 35% in FY14). Revenue stood at INR17.3b (-25%
YoY) v/s est of INR19.6b, while PAT stood at INR1.28b (ahead of estimate of
INR1.02b) on the back of lower interest cost (-11% QoQ) and lower tax (21%).
We believe CMBS of ~INR9b with average cost of debt of 10.9% to have partially
benefitted lower interest expense.
Lowest presales continue, leasing momentum positive:
1QFY15 presales
remains lowest ever level of 0.38msf (INR3.1b) v/s 0.44msf (INR3.1b) in 4QFY14.
Luxury projects viz. Kings Court and Camellias contributed ~45% of presales,
while Hyderabad, Indore and Bhubaneswar were other key contributors.
Annuity vertical performed better with 0.71msf of leasing (v/s 0.6msf in 4Q,
1.7msf in FY14). Major leasing happened in Gurgaon, Chennai and Delhi malls.
Annuity income stood at INR5.25b (v/s INR4.95b in 3Q)
Core FCFE negative INR7.7b; net debt up INR5.3b QoQ
:
Sustained weakness in
presales and lack of fresh launch has resulted in deterioration in core operating
cash flow. We calculate core FCFE negative at INR7.7b (post-dividend) v/s
negative INR13.1b in 4Q (-INR25b in FY14). DLF received ~INR2.4b of divestment
proceeds in 1QFY15, resulting into net increase in net debt by INR5.3b to
INR200b (0.7x), unadjusted for JV partners’ stakes.
Guiding deferred recovery cycle:
While concerns over gearing have moderated,
weakness in operations remains overhang. Management has been portraying a
cautious outlook for near-term with restrained strategy and likely torpidity in
cash flows in FY15. However, improving
macro outlook and various positive
developments in policy front should offer big benefits to the stock on leverage
play. The stock trades at 1.2x FY16 BV and 33.7x FY16 EPS. Asset based
valuation keeps us Buy.
We will revisit our estimates post further clarity in
Concall at 4pm on 1
st
August 2014 dial in +91 22 3960 0641 .
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.