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Time to turn bullish
Valuations are now
inexpensive, balance sheet to
improve; upgrade to BUY
Action: Upgrade to BUY
DLF has corrected by 28% in the past one year vs. a 4% gain in the BSE
Sensex on increasing interest rates in India, its inability to deleverage its
balance sheet, slowing property sales and poor sentiment for property
stocks in India. Valuations at a 23% discount to NAV are now inexpensive
and at their lowest since the crisis in end-2008. We now upgrade the stock
to BUY from Neutral with a higher TP of INR270, as we expect the
company to deliver on cash flows in FY12F and start deleveraging the
balance sheet by focusing on selling plotted land and through the sale of
non-core assets such as Aman Resorts.
Catalysts: Fall in inflation, increasing volumes, sale of assets
Our India strategists Prabhat Awasthi and Nipun Prem believe that
inflation momentum has peaked and a global growth slowdown could lead
to inflation peaking in the next few months. A fall in inflation could be
positive for DLF’s stock price, in our view. Increasing sales volumes and
sale of any assets could lead to better cash flow.
Valuation: Quoting at 23% discount to SOTP value; inexpensive
We value the company based on a net asset value methodology along
with providing a separate value for non-core assets and the 57% stake in
DLF Cyber City Developers Ltd (DCCDL). We increase our NAV to
INR219 from INR198 while valuing non-core assets at INR29 and the
DCCDL stake at INR21 to reach our revised target price of INR270 per
share, up from INR253. We do not provide any discount to NAV. The
stock is quoting at a 23% discount to this value and at 1.3x FY12F P/B,
which we think makes it inexpensive.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Time to turn bullish
Valuations are now
inexpensive, balance sheet to
improve; upgrade to BUY
Action: Upgrade to BUY
DLF has corrected by 28% in the past one year vs. a 4% gain in the BSE
Sensex on increasing interest rates in India, its inability to deleverage its
balance sheet, slowing property sales and poor sentiment for property
stocks in India. Valuations at a 23% discount to NAV are now inexpensive
and at their lowest since the crisis in end-2008. We now upgrade the stock
to BUY from Neutral with a higher TP of INR270, as we expect the
company to deliver on cash flows in FY12F and start deleveraging the
balance sheet by focusing on selling plotted land and through the sale of
non-core assets such as Aman Resorts.
Catalysts: Fall in inflation, increasing volumes, sale of assets
Our India strategists Prabhat Awasthi and Nipun Prem believe that
inflation momentum has peaked and a global growth slowdown could lead
to inflation peaking in the next few months. A fall in inflation could be
positive for DLF’s stock price, in our view. Increasing sales volumes and
sale of any assets could lead to better cash flow.
Valuation: Quoting at 23% discount to SOTP value; inexpensive
We value the company based on a net asset value methodology along
with providing a separate value for non-core assets and the 57% stake in
DLF Cyber City Developers Ltd (DCCDL). We increase our NAV to
INR219 from INR198 while valuing non-core assets at INR29 and the
DCCDL stake at INR21 to reach our revised target price of INR270 per
share, up from INR253. We do not provide any discount to NAV. The
stock is quoting at a 23% discount to this value and at 1.3x FY12F P/B,
which we think makes it inexpensive.
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