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DLF Limited
Overweight
DLF.BO, DLFU IN
3Q FY11: PAT below estimate but operating results inline; no reduction in net debt against our expectation
• Reported PAT below estimates but operational results in line: DLF
reported 3Q FY11 net earnings of Rs4.7B (+11% Q/Q, flat Y/Y), below
our expectation of Rs5.1B. While the 3Q revenues of Rs25B (+5% Q/Q,
+22% Y/Y) and EBITDA of Rs11.8B (+27% Q/Q, +40% Y/Y) were
largely in line with our estimates, the reported net income was adversely
impacted by high minority interest (Rs284MM). Management indicated
that the scale-up of execution in select projects led to a sharp increase in
minority interest. EBITDA margins (real estate) stood at 51% (vs.
42%/46% in 2Q FY11/3Q FY10). Net debt (at Rs207B) increased by
Rs7.8B during Dec-Q on account of one-time outflow for pref share
redemption (Rs4.5B) and new land acquisition.
• Key highlights of the analyst presentation -
o 3Q sales bookings stood at 2.48msf (+20% Q/Q) against the
2H run rate of 2msf a quarter. This takes overall 9M bookings
to 6.5msf/Rs46B significantly below its full year guidance of 15-
18msf/Rs80-90B (JPME: Rs71B). Pace of new launches remained
slow in Dec-Q on account of approval delays with Gurgaon
plotted (2msf @ Rs60,000 per sq yard) being the only project
launched. While the response to the plotted launch in Gurgaon has
been strong (phase 1 sold out); full impact on cash flows will be
seen in 4Q. Going ahead, co. is looking to launch 8msf of new
projects including 5msf of plotted developments in Gurgaon/
Chandigarh & 2msf of city-center projects in Delhi/Kochi.
o Office leasing remains healthy at 1.62msf (+4% Q/Q) thereby
taking overall 9M leasing to 4.2msf. With this, company has
already surpassed its full year initial guidance of 3-4msf over
9MFY11. Rentals remained largely stable. Further, retail segment
has also witnessed decent improvement with occupancies across
existing malls (~1.3msf) recovering to 90% (vs. 82% in Q4)
o Net debt at Rs207B increased by Rs8B on account of one-time
cash outflow for pref share redemption (Rs4.5B) and new land
acquisition. Of the total debt of Rs207B, Rs157B pertains to the
core real estate business which primarily comprises of (a) Rs100B
of lease rent discounting debt (rental income of Rs16.5B pa); b)
Rs57B of debt at development company (~1.8x Debt/3Q
annualized EBITDA).
o Company sold Rs4B of non-core assets during the Q thereby
taking the overall asset sales to Rs11B over 9M FY11. Overall the
company has achieved non-core asset sales of 29B to date against
the total guidance of Rs45B (ex wind power) set out at the
beginning of last year.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
DLF Limited
Overweight
DLF.BO, DLFU IN
3Q FY11: PAT below estimate but operating results inline; no reduction in net debt against our expectation
• Reported PAT below estimates but operational results in line: DLF
reported 3Q FY11 net earnings of Rs4.7B (+11% Q/Q, flat Y/Y), below
our expectation of Rs5.1B. While the 3Q revenues of Rs25B (+5% Q/Q,
+22% Y/Y) and EBITDA of Rs11.8B (+27% Q/Q, +40% Y/Y) were
largely in line with our estimates, the reported net income was adversely
impacted by high minority interest (Rs284MM). Management indicated
that the scale-up of execution in select projects led to a sharp increase in
minority interest. EBITDA margins (real estate) stood at 51% (vs.
42%/46% in 2Q FY11/3Q FY10). Net debt (at Rs207B) increased by
Rs7.8B during Dec-Q on account of one-time outflow for pref share
redemption (Rs4.5B) and new land acquisition.
• Key highlights of the analyst presentation -
o 3Q sales bookings stood at 2.48msf (+20% Q/Q) against the
2H run rate of 2msf a quarter. This takes overall 9M bookings
to 6.5msf/Rs46B significantly below its full year guidance of 15-
18msf/Rs80-90B (JPME: Rs71B). Pace of new launches remained
slow in Dec-Q on account of approval delays with Gurgaon
plotted (2msf @ Rs60,000 per sq yard) being the only project
launched. While the response to the plotted launch in Gurgaon has
been strong (phase 1 sold out); full impact on cash flows will be
seen in 4Q. Going ahead, co. is looking to launch 8msf of new
projects including 5msf of plotted developments in Gurgaon/
Chandigarh & 2msf of city-center projects in Delhi/Kochi.
o Office leasing remains healthy at 1.62msf (+4% Q/Q) thereby
taking overall 9M leasing to 4.2msf. With this, company has
already surpassed its full year initial guidance of 3-4msf over
9MFY11. Rentals remained largely stable. Further, retail segment
has also witnessed decent improvement with occupancies across
existing malls (~1.3msf) recovering to 90% (vs. 82% in Q4)
o Net debt at Rs207B increased by Rs8B on account of one-time
cash outflow for pref share redemption (Rs4.5B) and new land
acquisition. Of the total debt of Rs207B, Rs157B pertains to the
core real estate business which primarily comprises of (a) Rs100B
of lease rent discounting debt (rental income of Rs16.5B pa); b)
Rs57B of debt at development company (~1.8x Debt/3Q
annualized EBITDA).
o Company sold Rs4B of non-core assets during the Q thereby
taking the overall asset sales to Rs11B over 9M FY11. Overall the
company has achieved non-core asset sales of 29B to date against
the total guidance of Rs45B (ex wind power) set out at the
beginning of last year.
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