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Slackening business environment
DLF’s 1QFY12 earning report was disappointing on several counts: a)
Fresh leasing volume declined 39% to 0.97mn sq ft this quarter vs 1.6mn
quarterly run rate in FY11; ‘uncertainty on economic growth’, as per
management. Some cancellations (0.24mn) were witnessed this quarter as
well. b) Even fresh residential sales (2.2mn - c.60% were plots) were 12%
lower vs FY11 run rate. c) Debt remained at the elevated level of `239bn
(gross); net debt has gone up slightly QoQ. d) Receivables (including
unbilled receivables) remained high at `90bn+ vs. c.`100-110bn of yearly
revenue based on current run rate. Continuing efforts at non-core assets
monetisation (`1.7bn realised this quarter – see trend inside) is
commendable, which coupled with the recent strategy change (more of
plotted sales rather than vertical-development to upfront cash-flows and
mitigate execution risk) are what hopes are hinged on, as far as debt
reduction goes. This remains critical as interest outgo took away c.70% of
the operating cash-flow generated this quarter (90%+ on rolling 12M basis)
and interest charge now comprises 20% of revenue (vs 15%/18% in
FY10/FY11) – highest since listing.
Financials remained subdued; upmove in rental stream a positive: DLF
reported 1QFY12 revenue, EBITDA and adjusted net profit of `24.5bn,
`11.1bn and `3.6bn respectively. Revenue/EBITDA grew 21%/13% YoY but
higher interest charge (+28%), lower other income (-57%) led an 11% YoY fall
in adjusted net profit despite lower tax rate (down 380bps). Sequentially,
revenue was 9% lower and EBITDA (adjusted for cost reset in 4QFY11) was
marginally down by 3%. EBITDA margin declined 290bps YoY to 45.4% this
quarter vs 48.3% in 1QFY11 (4Q: 42.5% on adjusted basis) but decline in PBT
margin was even sharper (-775bps) due to the higher interest charge. 26%
QoQ growth in rental income (`3.7bn in 1Q) was a positive; total area under
lease stood at c.24.5mn sq ft as at Jun’11 – 3% higher sequentially, up 20% on
YoY comparison. Average office rentals, however, remained in the sub-`50/sq
ft per month range over the past several quarters.
Maintain TP; pessimistic-bias remains: We have broadly maintained our
earning and valuation estimates barring some slight tweaks; TP stays at `205
based on 1x Mar’12 NAV. Cash-flow disappointment, heightened debt levels,
slackening-business momentum remain areas of concern to us.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Slackening business environment
DLF’s 1QFY12 earning report was disappointing on several counts: a)
Fresh leasing volume declined 39% to 0.97mn sq ft this quarter vs 1.6mn
quarterly run rate in FY11; ‘uncertainty on economic growth’, as per
management. Some cancellations (0.24mn) were witnessed this quarter as
well. b) Even fresh residential sales (2.2mn - c.60% were plots) were 12%
lower vs FY11 run rate. c) Debt remained at the elevated level of `239bn
(gross); net debt has gone up slightly QoQ. d) Receivables (including
unbilled receivables) remained high at `90bn+ vs. c.`100-110bn of yearly
revenue based on current run rate. Continuing efforts at non-core assets
monetisation (`1.7bn realised this quarter – see trend inside) is
commendable, which coupled with the recent strategy change (more of
plotted sales rather than vertical-development to upfront cash-flows and
mitigate execution risk) are what hopes are hinged on, as far as debt
reduction goes. This remains critical as interest outgo took away c.70% of
the operating cash-flow generated this quarter (90%+ on rolling 12M basis)
and interest charge now comprises 20% of revenue (vs 15%/18% in
FY10/FY11) – highest since listing.
Financials remained subdued; upmove in rental stream a positive: DLF
reported 1QFY12 revenue, EBITDA and adjusted net profit of `24.5bn,
`11.1bn and `3.6bn respectively. Revenue/EBITDA grew 21%/13% YoY but
higher interest charge (+28%), lower other income (-57%) led an 11% YoY fall
in adjusted net profit despite lower tax rate (down 380bps). Sequentially,
revenue was 9% lower and EBITDA (adjusted for cost reset in 4QFY11) was
marginally down by 3%. EBITDA margin declined 290bps YoY to 45.4% this
quarter vs 48.3% in 1QFY11 (4Q: 42.5% on adjusted basis) but decline in PBT
margin was even sharper (-775bps) due to the higher interest charge. 26%
QoQ growth in rental income (`3.7bn in 1Q) was a positive; total area under
lease stood at c.24.5mn sq ft as at Jun’11 – 3% higher sequentially, up 20% on
YoY comparison. Average office rentals, however, remained in the sub-`50/sq
ft per month range over the past several quarters.
Maintain TP; pessimistic-bias remains: We have broadly maintained our
earning and valuation estimates barring some slight tweaks; TP stays at `205
based on 1x Mar’12 NAV. Cash-flow disappointment, heightened debt levels,
slackening-business momentum remain areas of concern to us.
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