DLF - Mounting Debt Amid Regulatory Concerns; Result Update Q2FY15:: Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

DLF reported Q2FY15 operational and financial performance above estimates led by higher-than-expected sales in its luxury residential Camelias, Gurgaon phase V. Debt increased in Q2FY15 by INR8.2bn due to dividend payment of INR4.4bn and ECB restatement of INR2.9bn. Debt has been rising and management has guided for negative operational cashflow of INR10bn for H2FY15 even as confidence on recovery in the company’s core market remains low. Further, recent regulatory developments along with other pending cases enhance risks to equity investors in our view. Accordingly, we raise the equity risk premium, factor in higher risk to approvals and lower our NAV-based target price to INR156 (INR246 earlier).

Quarterly beat

Q2FY15 operational and financial performance exceeded estimates. Sales bookings in DLF’s luxury project, Camelias, DLF phase V at 0.2msf at an ASP of INR33,156psf surprised us positively. Led by Camelias sales, financial performance too beat our estimates. However, debt increased during the quarter by INR8.2bn due to dividend payment of INR4.4bn and ECB restatement of INR2.9bn. Operational cash flows were supported by receipt of INR3bn from sale of land parcels.

Debt and regulatory concerns a drawback

The company’s debt has continued to increase and management has guided for negative operational cash flow of ~INR10bn in the next 2 quarters, even as confidence on recovery of DLF’s core markets remains weak. Adverse judgment in the CCI case, cancellation of Wazirabad land parcel and SEBI’s ban on access to capital markets have hit the company in the past few months. Further, we note that there are several pending cases against DLF that could create additional liabilities for it going forward.

LINK

https://www.edelweiss.in/research/DLF--Mounting-Debt-Amid-Regulatory-Concerns;-Result-Update-Q2FY15/27601.html