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DLF (DLFU)
Property
Plot sales are highlight of the quarter. DLF reported 3QFY11 revenues of Rs25 bn
(+22% yoy, +5% qoq) and PAT of Rs 4.7 bn (+2% yoy, +15% qoq). Of total
development sales of 2.5 mn sq. ft, we estimate 1.5 mn sq. ft of plotted sales,
indicating continuing subdued launch and sales trends. Based on this, we will reduce
our NAV and earnings estimate and review our recommendation post the company’s
earnings call.
Quarter much weaker than expected
DLF reported revenues of Rs25 bn (+22% yoy, +5% qoq), EBITDA of Rs12 bn (+40% yoy, +27%
qoq) and PAT of Rs4.7 bn (+2% yoy, +15% qoq). DLF’s revenues and net profit were 19% and
38% below our estimate as (1) we had factored in the entire impact of its plot sales (Alameda –
100 acres project in Sector 73, Gurgaon) in 3QFY11 versus DLF’s deferred expectations of larger
gains in 4QFY11 and (2) our projections of DLF achieving sales of 8 mn sq. ft (earlier target) in
2HFY11E versus DLF’s sales of 2.5 mn sq. ft (including plotted sales) in 3QFY11—this makes DLF’s
4Q sales target stiff at 5.5 mn sq. ft. EBITDA margins expanded by 829 bps qoq due to higher
margin plot sales. We will revise our earnings estimates post the company’s conference call.
We discuss the key items below:
Revenues: Revenue booking was aided by plot sales while (1) vertical development
revenues were impacted by lack of launches in 3QFY11 and (2) POCM booking
remained weak due to slower execution.
EBITDA margins: After hitting a 10-quarter low EBITDA margin of 39% in 2QFY11, DLF’s
margins at 47.5% bounced back sharply (upwards of 800 bps qoq) back to its comfort zone
band of 45-50%. Qoq expansion was led by plot sales of around 1.5 mn sq. ft which are at
65%+ plus margin.
Tax rate: The effective tax rate for DLF jumped to 29% from 15% in 2QFY11, again due to
plotted development contribution to earnings, we had reckoned for DLF being taxed at the
marginal rate.
Debt: Debt increased qoq to Rs207 bn (versus Rs199 bn as of end-2QFY11) despite non-core
asset divestment of Rs4 bn in 3QFY11. Current net/equity stands at 0.8X.
Unlikely to meet 12 mn sq. ft target. Based on its sales run-rate of 6.5 mn sq. ft in 3QFY11
and launch plan of 8 mn sq. ft (with potential for delay), we think its unlikely DLF will be able
to meet its FY2011E sales target of >12 mn sq. ft.
Operational performance
DLF had 56.4 mn sq. ft of projects under execution as on end-3QFY11 versus 56.5 mn sq.
ft as on end 2QFY11 and 50.5 mn sq. ft as on end 3QFY10. The company handed over 1
mn sq. ft of office space and added 0.9 mn sq. ft of office space for construction in
3QFY11.
DLF launched plotted developments, Alameda, spread across 100 acres in Sector 73 in
Gurgaon with a base selling price of Rs60,000/sq yard and managed to sell ~2 mn sq. ft
of plots in 3QFY11. The size of plots ranged from 500 to 700 sq yards and the company
is planning to launch a second phase in the near term.
DLF booked sales of 2.5 mn sq. ft in 3QFY11 versus 2.1 mn sq. ft in 2QFY11 and 3.1 mn
sq. ft in 3QFY11.
The company registered additional leases net of cancellations of 1.7 mn sq. ft versus 0.4
mn sq. ft in 3QFY10 and in line with 2QFY11 leasing. Total leased portfolio now stands at
23.7 mn sq. ft (22.4 mn sq. ft under offices and 1.3 mn sq. ft under retail) versus 22.1
mn sq. ft at end-2QFY11 and 17 mn sq. ft at end-3QFY10.
Total developable area as on end 3QFY11 is 399 mn sq. ft versus 406 mn at end 2QFY11.
Balance sheet highlights – debt increases qoq
Debt increased qoq to Rs207 bn (versus Rs199 bn as of end-2QFY11) despite non-core asset
divestment of Rs4 bn in 3QFY11. Current net/equity stands at 0.8X.
DLF mentioned that debt reduction has been impacted by (1) further investments in land –
around Rs4 bn, (2) lower execution due to better-than-expected monsoons and (3) delayed
new launches due to slow government approvals (need to check whether this is only for
Mumbai or even for other geographies.
Total debt repayable is Rs210 mn in 4QFY11 and Rs27 bn in FY2012E.
DLF expects cash flow to improve based on (1) cash flows from plot sales already done, (2)
focus on launches in 4QFY11 and (3) acceleration in construction momentum.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DLF (DLFU)
Property
Plot sales are highlight of the quarter. DLF reported 3QFY11 revenues of Rs25 bn
(+22% yoy, +5% qoq) and PAT of Rs 4.7 bn (+2% yoy, +15% qoq). Of total
development sales of 2.5 mn sq. ft, we estimate 1.5 mn sq. ft of plotted sales,
indicating continuing subdued launch and sales trends. Based on this, we will reduce
our NAV and earnings estimate and review our recommendation post the company’s
earnings call.
Quarter much weaker than expected
DLF reported revenues of Rs25 bn (+22% yoy, +5% qoq), EBITDA of Rs12 bn (+40% yoy, +27%
qoq) and PAT of Rs4.7 bn (+2% yoy, +15% qoq). DLF’s revenues and net profit were 19% and
38% below our estimate as (1) we had factored in the entire impact of its plot sales (Alameda –
100 acres project in Sector 73, Gurgaon) in 3QFY11 versus DLF’s deferred expectations of larger
gains in 4QFY11 and (2) our projections of DLF achieving sales of 8 mn sq. ft (earlier target) in
2HFY11E versus DLF’s sales of 2.5 mn sq. ft (including plotted sales) in 3QFY11—this makes DLF’s
4Q sales target stiff at 5.5 mn sq. ft. EBITDA margins expanded by 829 bps qoq due to higher
margin plot sales. We will revise our earnings estimates post the company’s conference call.
We discuss the key items below:
Revenues: Revenue booking was aided by plot sales while (1) vertical development
revenues were impacted by lack of launches in 3QFY11 and (2) POCM booking
remained weak due to slower execution.
EBITDA margins: After hitting a 10-quarter low EBITDA margin of 39% in 2QFY11, DLF’s
margins at 47.5% bounced back sharply (upwards of 800 bps qoq) back to its comfort zone
band of 45-50%. Qoq expansion was led by plot sales of around 1.5 mn sq. ft which are at
65%+ plus margin.
Tax rate: The effective tax rate for DLF jumped to 29% from 15% in 2QFY11, again due to
plotted development contribution to earnings, we had reckoned for DLF being taxed at the
marginal rate.
Debt: Debt increased qoq to Rs207 bn (versus Rs199 bn as of end-2QFY11) despite non-core
asset divestment of Rs4 bn in 3QFY11. Current net/equity stands at 0.8X.
Unlikely to meet 12 mn sq. ft target. Based on its sales run-rate of 6.5 mn sq. ft in 3QFY11
and launch plan of 8 mn sq. ft (with potential for delay), we think its unlikely DLF will be able
to meet its FY2011E sales target of >12 mn sq. ft.
Operational performance
DLF had 56.4 mn sq. ft of projects under execution as on end-3QFY11 versus 56.5 mn sq.
ft as on end 2QFY11 and 50.5 mn sq. ft as on end 3QFY10. The company handed over 1
mn sq. ft of office space and added 0.9 mn sq. ft of office space for construction in
3QFY11.
DLF launched plotted developments, Alameda, spread across 100 acres in Sector 73 in
Gurgaon with a base selling price of Rs60,000/sq yard and managed to sell ~2 mn sq. ft
of plots in 3QFY11. The size of plots ranged from 500 to 700 sq yards and the company
is planning to launch a second phase in the near term.
DLF booked sales of 2.5 mn sq. ft in 3QFY11 versus 2.1 mn sq. ft in 2QFY11 and 3.1 mn
sq. ft in 3QFY11.
The company registered additional leases net of cancellations of 1.7 mn sq. ft versus 0.4
mn sq. ft in 3QFY10 and in line with 2QFY11 leasing. Total leased portfolio now stands at
23.7 mn sq. ft (22.4 mn sq. ft under offices and 1.3 mn sq. ft under retail) versus 22.1
mn sq. ft at end-2QFY11 and 17 mn sq. ft at end-3QFY10.
Total developable area as on end 3QFY11 is 399 mn sq. ft versus 406 mn at end 2QFY11.
Balance sheet highlights – debt increases qoq
Debt increased qoq to Rs207 bn (versus Rs199 bn as of end-2QFY11) despite non-core asset
divestment of Rs4 bn in 3QFY11. Current net/equity stands at 0.8X.
DLF mentioned that debt reduction has been impacted by (1) further investments in land –
around Rs4 bn, (2) lower execution due to better-than-expected monsoons and (3) delayed
new launches due to slow government approvals (need to check whether this is only for
Mumbai or even for other geographies.
Total debt repayable is Rs210 mn in 4QFY11 and Rs27 bn in FY2012E.
DLF expects cash flow to improve based on (1) cash flows from plot sales already done, (2)
focus on launches in 4QFY11 and (3) acceleration in construction momentum.
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