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DLF (DLFU IN; Mkt Cap USD13.4b, CMP Rs346, Buy)
- DLF posted 2QFY11 results that were below our expectations. EBITDA was Rs9.3b, up 1.7% YoY and EBITDA margins fell to 39.2% (v/s 52.2% in 2QFY10).
Revenue was up 35.3% YoY at Rs23.7b (against our estimate of Rs21.7b) and adjusted net profit declined by 4.9% YoY to Rs4.2b.
- In 2QFY11 DLF booked sales of 2.1msf in the residential and commercial verticals and witnessed commercial leasing of 1.6msf (v/s 0.9msf in 1QFY11).
With net leasing of ~2.5msf of commercial space in 1HFY11, DLF seems to be on track to surpass its FY11 leasing guidance of ~4msf.
- With the repayment of Rs11.7b CCPS, net debt/equity increased from ~0.74x in 1QFY11 to ~0.8x in 2QFY11.
- A key near-term catalyst to improve the valuation multiple for the stock is (1) progress on debt leveraging, (2) revival in the commercial and retail verticals, (3) successful REIT listing at an attractive cap-rate, and (4) monetization of its Mumbai property. DLF trades at a 10% discount to our revised FY12E NAV of Rs384. It trades at a PER of 21.8x its FY12E EPS of Rs15.8 and P/B of 2x its FY12E BV of Rs170.4/share. Maintain Buy.
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