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DLF’s Q2FY12 revenue and PAT were ahead of estimates due to higherthan-
expected asset sales. However, net debt increasing by INR10bn QoQ
on account of delayed receipts from asset sales and sluggish sales/leasing
activity were major setbacks. While inflow from asset sales/launches in
H2FY12 may improve the cash flow scenario, we do not see any material
debt reduction. In the absence of near-term triggers, we maintain
‘HOLD/SP’ rating with target price of INR240/share.
Asset sales lift revenues, profits, but sales volume/leasing sluggish
DLF’s Q2FY12 revenues at INR25.3bn and PAT of INR3.7bn were ahead of our estimates
of INR22.0bn and INR3.4bn respectively, largely due to higher-than-expected bookings
from FSI sales of INR6.2bn. Although EBITDA margins remained healthy at 46%, QoQ
rise in interest costs and higher tax rate of 29% resulted in low PAT margins of 15%.
Sales volumes of 1.3 msf were weak due to the absence of new launches and net
leasing was tepid at only 0.21 msf. However, the company maintains guidance of ~7-8
msf of launches in H2FY12 through projects in Gurgaon, Panchkula and Mullanpur.
Debt remains elevated; asset sales not good enough
Net debt rose by INR10bn QoQ to INR225bn because of weak volume, high
dividend/tax payments of ~INR8.3bn and capex/land purchase of INR2.3bn. While
receipts from asset sales of ~INR10bn in H2FY12 may prop up cash inflows, we believe
that DLF is having a ’treadmill effect’ as these sales may only serve to bring back net
debt to Q1FY12 levels (INR215bn) hence closure of Aman deal (INR20bn) becomes key.
Outlook and valuations: Debt reduction crucial; maintain ‘HOLD’
While DLF has made progress on the asset monetization front, weak
volumes/operational cash flows in its core business seems to have negated its debt
reduction plan. We believe that a noticeable pick-up in volume in H2FY12, driven
through launches and Aman hotels deal sailing through may improve DLF’s cash flow
profile. However, given the adverse macro-environment, any slip-ups may dent debt
reduction plans. Therefore, we maintain ‘HOLD/SP’ rating on DLF with a target price of
INR240 (INR255 earlier) on FY12E NAV.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DLF’s Q2FY12 revenue and PAT were ahead of estimates due to higherthan-
expected asset sales. However, net debt increasing by INR10bn QoQ
on account of delayed receipts from asset sales and sluggish sales/leasing
activity were major setbacks. While inflow from asset sales/launches in
H2FY12 may improve the cash flow scenario, we do not see any material
debt reduction. In the absence of near-term triggers, we maintain
‘HOLD/SP’ rating with target price of INR240/share.
Asset sales lift revenues, profits, but sales volume/leasing sluggish
DLF’s Q2FY12 revenues at INR25.3bn and PAT of INR3.7bn were ahead of our estimates
of INR22.0bn and INR3.4bn respectively, largely due to higher-than-expected bookings
from FSI sales of INR6.2bn. Although EBITDA margins remained healthy at 46%, QoQ
rise in interest costs and higher tax rate of 29% resulted in low PAT margins of 15%.
Sales volumes of 1.3 msf were weak due to the absence of new launches and net
leasing was tepid at only 0.21 msf. However, the company maintains guidance of ~7-8
msf of launches in H2FY12 through projects in Gurgaon, Panchkula and Mullanpur.
Debt remains elevated; asset sales not good enough
Net debt rose by INR10bn QoQ to INR225bn because of weak volume, high
dividend/tax payments of ~INR8.3bn and capex/land purchase of INR2.3bn. While
receipts from asset sales of ~INR10bn in H2FY12 may prop up cash inflows, we believe
that DLF is having a ’treadmill effect’ as these sales may only serve to bring back net
debt to Q1FY12 levels (INR215bn) hence closure of Aman deal (INR20bn) becomes key.
Outlook and valuations: Debt reduction crucial; maintain ‘HOLD’
While DLF has made progress on the asset monetization front, weak
volumes/operational cash flows in its core business seems to have negated its debt
reduction plan. We believe that a noticeable pick-up in volume in H2FY12, driven
through launches and Aman hotels deal sailing through may improve DLF’s cash flow
profile. However, given the adverse macro-environment, any slip-ups may dent debt
reduction plans. Therefore, we maintain ‘HOLD/SP’ rating on DLF with a target price of
INR240 (INR255 earlier) on FY12E NAV.
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