DLF (2QFY15) : Beware the dead cat bounce. Maintain SELL :: HDFC Sec, link

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Beware the dead cat bounce
2QFY15 results showed sequential improvement,
with revenues of Rs 20.1bn (our est. was Rs 17.8bn)
increasing 17% QoQ with new projects hitting
revenue recognition. Consequently, EBITDA of Rs
8.0bn was higher than est. Rs 6.0bn (EBITDA Margin
of 42% vs. est. 34%). However, lower other income
and exceptional loss of Rs 0.4bn led to RPAT of Rs
1.1bn that was marginally ahead of est. Rs 1.0bn.
Key positive was a sequential improvement in
2QFY15 sales bookings to Rs 9.2bn (Rs 3bn of
bookings in 1QFY15 and 4QFY14) owing to 0.2msf of
sales worth Rs 6.8bn from Phase V Camelias project.
DLF’s stock performance has been volatile post the
SEBI ruling barring the company and its promoters
from the Indian capital markets. Although we
currently value DLF at Rs 165/sh on FY16E NAV (CMP
Rs 139), we believe that investors should stay away
until clarity emerges on the SEBI ruling. We maintain
our SELL rating and remain weary of any further
negative news flow. Notes to Accounts in DLF’s
2QFY15 results reveal that DLF had been served
another Show Cause Notice (SCN) dated 28th Aug,
2013 under sections 15HA and 15HB of the SEBI Act,
1992. While we await details on the case, DLF has
mentioned that hearings have concluded and the
company is awaiting the final order on the same.
 Debt rises QoQ : DLF’s net debt rose Rs 8.2bn QoQ to
Rs 199bn owing to dividend payments of Rs 5.2bn and
restatement of ECB loan by Rs 2.9bn owing to
extension of tenure to July 2021.. With no large launch
so far in 1HFY15, DLF will need to launch a number of
projects in 2HFY15E to keep debt levels under control.
 Introduction of REITs/CMBS possible triggers :
Although there is uncertainty on whether DLF and its
subsidiaries will be able to list a REIT, we believe that
DLF will continue to explore further options of
converting existing lease rental discounting (LRD) loans
to CMBS to achieve capital efficiency. Further, any
clarity emerging on taxation issues with respect to
REITs may enable DLF to achieve cap rate compression.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3009819