DLF :2QFY11 analyst presentation highlights: JPMorgan

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DLF :2QFY11 analyst presentation highlights- Office leasing
improves but sales business running behind target.
Debt levels stable Q/Q


• 2QFY11 results : DLF reported 2QFY11 net earnings of Rs4.2B (+2%
Q/Q, -5% Y/Y) broadly in line with our expectations. Revenues of
Rs23.7B (+17% Q/Q, +35% Y/Y) were 12% ahead of our estimate of
Rs21.2B; however the impact on net income was offset by lower than
expected real estate EBITDA margins of 42% (vs. 51% in 1Q) and high
other business losses (Rs729MM). Lower EBITDA margins were
explained to be on account of adverse product mix. Company press
release states that it expects full year margins to be in the 45-50% range.
• Key highlights of analyst presentation
o 2QFY11 pre-sales of 2 msf were largely stable QoQ. This
takes 1HFY11 presales to 4 msf or 26B vs. full year
guidance of 15-18 msf and target of Rs 80-90B (JPM
est. Rs 71B). Clearly company is banking on a pick up in
launches in 2H to cover up the run rate. Launch of NTC
Mills and plotted developments in Gurgaon are likely the
prime driver of company’s pre sales guidance. New
launches were low in 1H on account of approval delays.
o Office leasing improved to 1.56 msf vs. 1 msf pre leased
last quarter. Average rentals were at Rs 43psf with
Gurgaon at Rs 55psf. Leasing run rate is running better
than company's initial guidance of 3-4 msf pre leasing for
FY11.
o Operating cash flow (post tax and interest) for 1H
FY11 stood at Rs 2.9B. This was impacted by higher cash
tax payment of Rs 4.4B (vs. P&L provision of Rs 2.4B).
Company has come out with an incremental operating cash
flow guidance at Rs 7.5-10B per quarter (this likely
includes asset sales).
o Net debt at Rs 199B remained largely stable QoQ as the
company redeemed pref. shares of Rs 11.7B of Lehman
brothers.
o Company sold Rs 4.1B of assets (primarily in Mumbai)
during the Q taking total asset sales to Rs 7B during 1H
and Rs 25b over 18 months. DLF expects another Rs 20B
in asset sales over 12-18months.