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DLF reported better than expected 1Q12 operating performance but higher interest and tax
coupled with lower other income resulted in muted earnings. Operationally, sales booked and
leasing were largely on track. We expect debt reduction from 2Q12 as non-core asset
monetization is gaining momentum. Buy.
Strong operating performance but non operating items results in muted earnings
DLF reported 1Q12 revenues Rs24.4bn (21% yoy) vs. our forecast of Rs22.8bn and
Bloomberg consensus estimate of Rs23.5bn. Of the total revenues of Rs 24.4bn, 15%
(Rs 3.65bn) attributed towards rentals from office and retail assets.
EBITDA margin was at 45.4% vs. 48.3% in 1Q11 and our estimates of 40.7% as EBITDA at
Rs11.1bn (13% yoy) was 20% above our estimates (Rs9.3bn) and 10% above consensus
(Rs10bn).
Tax rate came in at 25.5% vs. 29.3% in 1Q11 and our estimate of 19%. PAT at Rs3.6bn
(-13% yoy) vs. our estimate of Rs3.9bn and consensus estimates of Rs4bn. Adjusted for
losses of its non-core businesses (DLF Pramerica Life Insurance Company, hotels), PAT was
Rs4.1bn (-11% yoy).
Operational highlights - while development business largely in line
Q1-FY 12 witnessed sales of 2.2 msf (comprising 1.1 msf of new launch of Sec 91 / 92,
Gurgaon , 0.2msf from Indore plots and 0.9 msf from existing stock in New Gurgaon,
Chennai, Bangalore and Panchkula mid-income homes ) vs 3.8msf in Q4 11 & 1.9msf in
Q1 11 for its development business.
1QFY12 gross leasing run-rate was weak at 0.97 msf (vs 1.17 msf in Q1 FY11 & 1.4 msf in
Q4 FY 11) as clarity on tax implications on SEZs are yet to emerge, leading to a hold on fresh
planned expansion by SEZ developers. However on a net basis it improved on sequential
basis as 1QFY12 net leasing were at 0.73 msf (vs 0.99 msf in Q1 FY11 & 0.04 msf in
Q4 FY 11).
We believe it is largely on track with its sales booking guidance of 12msf (10msf of plots) and
2.5-3msf of leasing in FY12
Delivery - 1.9msf in offices during the quarter. FY12 expected deliveries of greater than
12 msf spread across Gurgaon, Kolkatta, Chennai, etc.
Balance sheet - expect debt reduction from 2QFY12
Net debt and net gearing largely stable- Net debt at end-1QFY12 was Rs226.9bn, marginally
higher compared to Rs225.6bn in FY11. Net gearing at end-1QFY12 was 85% compared to
86% in FY11.
Asset monetisation was subdued at Rs1.65bn (similar to Rs1.6bn of the previous quarter). As
per company, non-core asset monetization is gaining momentum, as some deals are at an
advanced stage while others are seeing encouraging responses at desired price points. On
track to meet the divestment target of Rs 60-70bn over the next 2-3 years.
Expect debt reduction from 2QFY12 - as visibility with respect to non-core divestments is to
be seen by end of Q2 as these proceeds are to be applied for debt reduction.
Debtors at end-1QFY12 were Rs18.2bn (26% yoy, 5% qoq) which implied debtor days of 68
compared to 65 days in 1QFY11 and 59 days in 4QFY11.
Other highlights
Strategy of launching plotted developments is working well for DLF- as it is less construction
intensive and hence there are lower inflationary risks coupled with accelerated cash flows and
robust profitability margins
During the quarter ended June 2011, DLF received an assessment order for AY2008-09 from
the Income Tax department, creating an additional demand of Rs5.5bn of which Rs4.9bn
pertains to demand on account of disallowance of SEZ profit u/s 80IAB of Income Tax Act.
During the last year, the company had also received similar demands in two of its subsidiaries
totaling Rs11.6bn. The respective companies have challenged these orders with the
appropriate authorities. Based on the advice from the independent tax experts, the Group is
confident that the additional demand so created will not be sustained and therefore no
provisions has been made in the consolidated financial results.
More details awaited (balance sheet and operational highlights) from the analyst call
tomorrow. We have a Buy rating with SOTP-based target price of Rs250/share is based on an
end-FY12F DCF value of Rs204/share (post a 10% discount to GAV) for its land bank and
Rs46/share for completed leased assets (60% share).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DLF reported better than expected 1Q12 operating performance but higher interest and tax
coupled with lower other income resulted in muted earnings. Operationally, sales booked and
leasing were largely on track. We expect debt reduction from 2Q12 as non-core asset
monetization is gaining momentum. Buy.
Strong operating performance but non operating items results in muted earnings
DLF reported 1Q12 revenues Rs24.4bn (21% yoy) vs. our forecast of Rs22.8bn and
Bloomberg consensus estimate of Rs23.5bn. Of the total revenues of Rs 24.4bn, 15%
(Rs 3.65bn) attributed towards rentals from office and retail assets.
EBITDA margin was at 45.4% vs. 48.3% in 1Q11 and our estimates of 40.7% as EBITDA at
Rs11.1bn (13% yoy) was 20% above our estimates (Rs9.3bn) and 10% above consensus
(Rs10bn).
Tax rate came in at 25.5% vs. 29.3% in 1Q11 and our estimate of 19%. PAT at Rs3.6bn
(-13% yoy) vs. our estimate of Rs3.9bn and consensus estimates of Rs4bn. Adjusted for
losses of its non-core businesses (DLF Pramerica Life Insurance Company, hotels), PAT was
Rs4.1bn (-11% yoy).
Operational highlights - while development business largely in line
Q1-FY 12 witnessed sales of 2.2 msf (comprising 1.1 msf of new launch of Sec 91 / 92,
Gurgaon , 0.2msf from Indore plots and 0.9 msf from existing stock in New Gurgaon,
Chennai, Bangalore and Panchkula mid-income homes ) vs 3.8msf in Q4 11 & 1.9msf in
Q1 11 for its development business.
1QFY12 gross leasing run-rate was weak at 0.97 msf (vs 1.17 msf in Q1 FY11 & 1.4 msf in
Q4 FY 11) as clarity on tax implications on SEZs are yet to emerge, leading to a hold on fresh
planned expansion by SEZ developers. However on a net basis it improved on sequential
basis as 1QFY12 net leasing were at 0.73 msf (vs 0.99 msf in Q1 FY11 & 0.04 msf in
Q4 FY 11).
We believe it is largely on track with its sales booking guidance of 12msf (10msf of plots) and
2.5-3msf of leasing in FY12
Delivery - 1.9msf in offices during the quarter. FY12 expected deliveries of greater than
12 msf spread across Gurgaon, Kolkatta, Chennai, etc.
Balance sheet - expect debt reduction from 2QFY12
Net debt and net gearing largely stable- Net debt at end-1QFY12 was Rs226.9bn, marginally
higher compared to Rs225.6bn in FY11. Net gearing at end-1QFY12 was 85% compared to
86% in FY11.
Asset monetisation was subdued at Rs1.65bn (similar to Rs1.6bn of the previous quarter). As
per company, non-core asset monetization is gaining momentum, as some deals are at an
advanced stage while others are seeing encouraging responses at desired price points. On
track to meet the divestment target of Rs 60-70bn over the next 2-3 years.
Expect debt reduction from 2QFY12 - as visibility with respect to non-core divestments is to
be seen by end of Q2 as these proceeds are to be applied for debt reduction.
Debtors at end-1QFY12 were Rs18.2bn (26% yoy, 5% qoq) which implied debtor days of 68
compared to 65 days in 1QFY11 and 59 days in 4QFY11.
Other highlights
Strategy of launching plotted developments is working well for DLF- as it is less construction
intensive and hence there are lower inflationary risks coupled with accelerated cash flows and
robust profitability margins
During the quarter ended June 2011, DLF received an assessment order for AY2008-09 from
the Income Tax department, creating an additional demand of Rs5.5bn of which Rs4.9bn
pertains to demand on account of disallowance of SEZ profit u/s 80IAB of Income Tax Act.
During the last year, the company had also received similar demands in two of its subsidiaries
totaling Rs11.6bn. The respective companies have challenged these orders with the
appropriate authorities. Based on the advice from the independent tax experts, the Group is
confident that the additional demand so created will not be sustained and therefore no
provisions has been made in the consolidated financial results.
More details awaited (balance sheet and operational highlights) from the analyst call
tomorrow. We have a Buy rating with SOTP-based target price of Rs250/share is based on an
end-FY12F DCF value of Rs204/share (post a 10% discount to GAV) for its land bank and
Rs46/share for completed leased assets (60% share).
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