Shares of DLF climbed 3 per cent in Wednesday’s trade, as the realtor said its arm has approved the allotment of Rs 1,150 crore by allotting NCDs on a private placement basis. The scrip rose 2.87 per cent to hit a high of Rs 403.70 on BSE. At this price, the stock was 6.5 per cent away from its 52-week high of Rs 429.80 hit in January earlier this year. Like many other real estate stocks, 2022 has been a muted year after strong returns in 2021.
Nuvama Institutional Equities said that DLF continued to enjoy the highest operating surplus among developers in H1FY23. It said DLF has been the only developer that has managed to monetise its assets (dividends from DCCDL and transfer of rental assets) in a significant way. Besides, it said DLF’s balance sheet has undergone a sea of change, courtesy its aggressive debt reduction. DLF sports the lowest net debt to equity in the realty space, it said.
“DLF has the balance sheet/cash flow strength to spend money for growth; considering that it is sitting on a large land bank, it is likely to use its cash flow generation to launch more projects and enhance its rental portfolio,” it said in a November 29 note.
DLF has, over the last few years, sustained steady growth in launches, pre-sales, rental income and cash flows. The DLF management is targeting double-digit pre-sales growth in Devco and 15 per cent rental income CAGR in DCCDL.
The management is going to stay focused on free cash flows, anticipating internal accruals to be sufficient to meet working capital needs, Nuvama said in separate note, adding that the company has a robust launch pipeline across cities and segments and shall enter the Noida market in the future.
“Robust growth prospects for its residential as well as rental businesses make DLF our top pick in the realty space. We maintain ‘BUY’ with a target of Rs 483,” it said on November 29.
Motilal Oswal, however, is neutral on DLF. “Despite a strong response to recent launches, DLF reiterated its FY23 pre-sales guidance of Rs 8000 crore, citing an uncertain economic environment. Q3FY23 will see another launch at Panchkula and a high rise project will be launched in Q4. The new tower launch at One Midtown is scheduled for Q1FY24, but the management can bring it forward to Q4FY23,” it said.
Sharekhan in an October note said DLF continues to show strong sales bookings and a healthy launch pipeline lined up over the next two years, which is expected to sustain healthy growth in sales booking. Although collections have lagged with respect to sales booking achieved, but they are expected to increase from Q3FY2023.
The company continues to lower debt, which is expected to continue led by healthy cash surplus generation.
“DLF’s strong leadership position in Delhi-NCR, strong residential project pipeline, increasing rental portfolio, large land reserves at low carrying costs, and strong housing market tailwinds provide a high-growth opportunity. We retain our Positive view on the stock,” it said.
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