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DLF stock has spiked 18% in the last 1 month on the back of positive newsflow on asset
sale. However, we expect 2Q12 results to be muted due to weak sales momentum in the
quarter and cashflows from asset sale (and thereby debt reduction) to start only from 3Q.
DLF stock price spiked 18% in the last 1 month on newsflow of asset sale
Press reports (The Economic Times, ET) suggest the visibility of non-core asset
monetisation worth Rs30bn in the next six months, which would partially reduce DLF’s
high net debt (Rs227bn as of 30 June 2011).
As per various press reports, the assets up for sale include: 1) the sale of the Pune IT
SEZ (in which DLF owns ~70% stake) for Rs8-9bn (ET, 13 September 2011); 2) the sale
of the Noida IT Park (in which DLF owns ~70% stake) for Rs4-5bn (ET, 21 September
2011); 3) the sale of a 28-acre property in Gurgaon for Rs4bn (ET, 19 August 2011); and
4) the sale of Aman Resorts for Rs18bn (ET, 20 September 2011). This, in our view, has
led to 18% spike in DLF stock price in the last 1 month.
Aman resort sale likely to conclude by FY12 (not priced in our view)
Media (CNBC) reports that of the 16 non-binding bids for sale of Aman report DLF
received, it has shortlisted 7 and is now inviting binding bids with a valuation of more than
US$400m (~Rs 20bn). We believe this sale is likely to close by end of FY12 which we
have already factored in our estimates. However, we believe that the stock market is yet
to price in the sale of Aman resorts.
Muted operational sales to weaken 2Q performance
Given the slowdown in sector demand and hence volumes, DLF also has not been able
to launch/sell plot developments as it expected in Lucknow and Panchkula this quarter. In
addition, with no other significant launches and sales in 2Q, we expect the earnings run
rate to slowdown in 2Q.
Thus, we expect muted 2Q interims led by weak operational sales which would be partially
offset by non-core asset sale. We expect Reported revenues of Rs 25.3bn (+7% yoy, which
includes Rs 4.4bn of Gurgaon land sales), EBITDA of Rs 10.3bn (margins at 40.7%) and PAT
at Rs 3.7bn (-9% yoy). Excluding DLF's Gurgaon land sale, we expect revenues of Rs 20.9bn
(-12% yoy), EBITDA of Rs 8.1bn (margins at 38.7%) and PAT at Rs 2.1bn (-49% yoy).
Debt reduction commencement to be pushed by a quarter to 3Q
As we do not expect any positive cashflows from operations in 2Q due to muted operational
sales, we now expect the debt reduction to commence only from 3Q. We believe the
improvement in cashflows from operations in 2H12 (during festive season). We however
believe that cashflows from the sale of Gurgaon land, Pune IT SEZ and Noida IT Park to the
tune of Rs15bn expected to come in 3Q which would commence deleveraging for DLF.
Expect weak 2Q sales momentum, festive season could drive growth in 2H
While the current slowdown in demand is expected to result in muted 2Q operational
perfromance for DLF, we expect the proposed launches and sales (in Mullanpur - near
Chandigarh and Bangalore to be followed by Panchkula) to happen during the festival season
(Oct-Dec 2011), enabling DLF to improve operational cash flows during 2HFY12.
Maintain buy on DLF’s focus on de-leveraging strategy
We maintain our Buy rating with SOTP-based target price of Rs260/share which is based on
an end-FY13F DCF value of Rs214/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 stock has spiked 18% in the last 1 month on the back of positive newsflow on asset
sale. However, we expect 2Q12 results to be muted due to weak sales momentum in the
quarter and cashflows from asset sale (and thereby debt reduction) to start only from 3Q.
DLF stock price spiked 18% in the last 1 month on newsflow of asset sale
Press reports (The Economic Times, ET) suggest the visibility of non-core asset
monetisation worth Rs30bn in the next six months, which would partially reduce DLF’s
high net debt (Rs227bn as of 30 June 2011).
As per various press reports, the assets up for sale include: 1) the sale of the Pune IT
SEZ (in which DLF owns ~70% stake) for Rs8-9bn (ET, 13 September 2011); 2) the sale
of the Noida IT Park (in which DLF owns ~70% stake) for Rs4-5bn (ET, 21 September
2011); 3) the sale of a 28-acre property in Gurgaon for Rs4bn (ET, 19 August 2011); and
4) the sale of Aman Resorts for Rs18bn (ET, 20 September 2011). This, in our view, has
led to 18% spike in DLF stock price in the last 1 month.
Aman resort sale likely to conclude by FY12 (not priced in our view)
Media (CNBC) reports that of the 16 non-binding bids for sale of Aman report DLF
received, it has shortlisted 7 and is now inviting binding bids with a valuation of more than
US$400m (~Rs 20bn). We believe this sale is likely to close by end of FY12 which we
have already factored in our estimates. However, we believe that the stock market is yet
to price in the sale of Aman resorts.
Muted operational sales to weaken 2Q performance
Given the slowdown in sector demand and hence volumes, DLF also has not been able
to launch/sell plot developments as it expected in Lucknow and Panchkula this quarter. In
addition, with no other significant launches and sales in 2Q, we expect the earnings run
rate to slowdown in 2Q.
Thus, we expect muted 2Q interims led by weak operational sales which would be partially
offset by non-core asset sale. We expect Reported revenues of Rs 25.3bn (+7% yoy, which
includes Rs 4.4bn of Gurgaon land sales), EBITDA of Rs 10.3bn (margins at 40.7%) and PAT
at Rs 3.7bn (-9% yoy). Excluding DLF's Gurgaon land sale, we expect revenues of Rs 20.9bn
(-12% yoy), EBITDA of Rs 8.1bn (margins at 38.7%) and PAT at Rs 2.1bn (-49% yoy).
Debt reduction commencement to be pushed by a quarter to 3Q
As we do not expect any positive cashflows from operations in 2Q due to muted operational
sales, we now expect the debt reduction to commence only from 3Q. We believe the
improvement in cashflows from operations in 2H12 (during festive season). We however
believe that cashflows from the sale of Gurgaon land, Pune IT SEZ and Noida IT Park to the
tune of Rs15bn expected to come in 3Q which would commence deleveraging for DLF.
Expect weak 2Q sales momentum, festive season could drive growth in 2H
While the current slowdown in demand is expected to result in muted 2Q operational
perfromance for DLF, we expect the proposed launches and sales (in Mullanpur - near
Chandigarh and Bangalore to be followed by Panchkula) to happen during the festival season
(Oct-Dec 2011), enabling DLF to improve operational cash flows during 2HFY12.
Maintain buy on DLF’s focus on de-leveraging strategy
We maintain our Buy rating with SOTP-based target price of Rs260/share which is based on
an end-FY13F DCF value of Rs214/share (post a 10% discount to GAV) for its land bank and
Rs46/share for completed leased assets (60% share)
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