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India Equity Research Reports, IPO and Stock News
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Key Takeaways
Stronger guidance on divestment/deleveraging
The management hinted that a few major divestment negotiations would be concluded
over the next couple of months. Of its total de-leveraging target of INR100b over the
next three years, the company plans to reduce over INR30b in FY12.
DLF is in advanced stages of documentation for divestment of four assets of ~INR40b
(including Aman Resort), while the monetization of IT Parks in Noida and Pune
(expected valuation of INR12b-13b) has reached the final stages of conclusion.
DLF's underperformance with regard to its stated asset divestment plan over the
past one year has been a key overhang. However, the management portrayed greater
certainty following shift in control on divestment from asset level management to
core central management level.
Launch to gain traction in 2HFY12; "go slow" strategy in leasing
DLF has indicated ~2msf of new launches in 2QFY12 in Chandigarh (Panchkula and
Mulanpur). A larger portion of its new launches are planned for 2HFY12, including
premium-end project Magnolia-II in 4QFY12 (expected rate of INR17,000/sf).
The management maintained lower leasing guidance of 2.5-3msf and lower capex
plan, largely to leverage on the expected rental appreciation of 10-15%, going
forward. DLF expects rental income to grow to ~INR15b/INR18b in FY12/FY13.
Confident of victory in CCI issue; appealing against penalty
DLF has expressed extreme confidence in overcoming the recent INR6.3b penalty
imposed by Competition Commission of India (CCI) on account of the allegation of
misusing its dominant position in agreements with buyers in the Belaire project.
The management mentioned that DLF will appeal against the order with the Appellate
Forum of CCI. The company differs with the stated 'dominance position' status,
citing that DLF is one among 18 developers in Gurgaon.
Strong outlook barring a few markets; execution remains a key challenge.
DLF sees strong broadbased demand across locations, barring Noida (oversupply),
Mumbai (approval issue) and Hyderabad (political uncertainty). Monetization plan
of Mumbai property at status-quo due to problems in obtaining approvals.
Cost inflation, tightening liquidity, labor shortage and approval delays are major
headwinds against on-time execution.
Valuation and view
Meaningful progress in asset sales along with successful debt leveraging and
softening of borrowing cost would be the key catalyst for the stock. The stock trades
at 16.1x FY13E EPS, 1.1x FY13E BV, and at 40% discount to our NAV estimate. Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Stronger guidance on divestment/deleveraging
The management hinted that a few major divestment negotiations would be concluded
over the next couple of months. Of its total de-leveraging target of INR100b over the
next three years, the company plans to reduce over INR30b in FY12.
DLF is in advanced stages of documentation for divestment of four assets of ~INR40b
(including Aman Resort), while the monetization of IT Parks in Noida and Pune
(expected valuation of INR12b-13b) has reached the final stages of conclusion.
DLF's underperformance with regard to its stated asset divestment plan over the
past one year has been a key overhang. However, the management portrayed greater
certainty following shift in control on divestment from asset level management to
core central management level.
Launch to gain traction in 2HFY12; "go slow" strategy in leasing
DLF has indicated ~2msf of new launches in 2QFY12 in Chandigarh (Panchkula and
Mulanpur). A larger portion of its new launches are planned for 2HFY12, including
premium-end project Magnolia-II in 4QFY12 (expected rate of INR17,000/sf).
The management maintained lower leasing guidance of 2.5-3msf and lower capex
plan, largely to leverage on the expected rental appreciation of 10-15%, going
forward. DLF expects rental income to grow to ~INR15b/INR18b in FY12/FY13.
Confident of victory in CCI issue; appealing against penalty
DLF has expressed extreme confidence in overcoming the recent INR6.3b penalty
imposed by Competition Commission of India (CCI) on account of the allegation of
misusing its dominant position in agreements with buyers in the Belaire project.
The management mentioned that DLF will appeal against the order with the Appellate
Forum of CCI. The company differs with the stated 'dominance position' status,
citing that DLF is one among 18 developers in Gurgaon.
Strong outlook barring a few markets; execution remains a key challenge.
DLF sees strong broadbased demand across locations, barring Noida (oversupply),
Mumbai (approval issue) and Hyderabad (political uncertainty). Monetization plan
of Mumbai property at status-quo due to problems in obtaining approvals.
Cost inflation, tightening liquidity, labor shortage and approval delays are major
headwinds against on-time execution.
Valuation and view
Meaningful progress in asset sales along with successful debt leveraging and
softening of borrowing cost would be the key catalyst for the stock. The stock trades
at 16.1x FY13E EPS, 1.1x FY13E BV, and at 40% discount to our NAV estimate. Buy.
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