30 August 2016
1QFY17 Results Update | Sector: Real Estate
DLF
Buy
BSE SENSEX
27,903
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
8,607
DLFU IN
1785.0
282.0 / 4.2
170 / 73
-2/44/32
1438
25.1
CMP: INR158
TP: INR201 (+27%)
Weak presales; policy measures key trigger
1QFY17 profit up led by one-off exceptional item:
DLF’s PAT increased sharply
to INR2.6b in 1QFY17, led by one-off exceptional income of INR3b from the
sale of DT Cinemas to PVR Cinemas. Revenues decreased 16% YoY to INR18.7b
during the quarter. EBITDA of INR7.5b (-10% YoY) missed estimate by 11%, but
margins at 40% showed an improvement on YoY basis.
Muted presales:
Presales came in at 0.03msf (INR2.1b), of which ~55% was
contributed by Phase V projects (Crest and Camellias), followed by new
Gurgaon assets (INR0.9b). The company achieved gross leasing of 0.86msf in
1QFY17, but lease expiry stood at 0.91msf. Leasing offtake was also affected by
virtually no inventory at most projects. Effective net debt stood at INR221b
(debt/equity of 0.8x).
Guidance factors in no major improvement in DevCo:
FY17 presales guidance
of INR30-35b and leasing guidance of 1.5msf highlight no major improvement
on the immediate horizon. However, it expects presales contribution from the
long-hibernated new Gurgaon assets to gradually improve in FY17 and rental
growth to remain steady at INR27b/30b in FY17/18.
Valuation and view:
Barring interim excitement in Phase V projects, the
outlook remains subdued for the DevCo business. RentCo performance has
been steady and offers value unlocking potential. Maintain
Buy
with TP of
INR201 (SOTP-based), with macro policy as key immediate trigger.
Financials & Valuations (INR b)
2016 2017E
Y/E Mar
Net Sales
92.6
84.3
EBITDA
38.7
34.9
Adj PAT
5.5
7.0
EPS (INR)
3.1
3.9
EPS Gr. (%)
1.5
27.2
BV/Sh. (INR)
156.3 157.9
RoE (%)
1.9
2.4
RoCE (%)
3.7
4.6
Payout (%)
76.0
58.2
P/E (x)
51.3
40.4
P/BV (x)
1.0
1.0
EV/EBITDA (x)
13.1
14.7
Div. Yield (%)
1.3
1.3
2018E
90.7
38.5
8.2
4.6
17.9
160.2
2.8
4.5
49.4
34.2
1.0
13.2
1.3
Estimate change
TP change
Rating change
Aashumi Mehta
(Aashumi.Mehta@MotilalOswal.com); +91 22 6129 1537
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.