Despite lower Q1 bookings, DLF on course to hit FY24 sales target

From its weekly high, the stock of India’s largest listed player by market capitalisation -- DLF -- slipped 5.5 per cent. Lack of new launches meant that bookings/pre-sales for the June quarter of the 2023-24 financial year (Q1FY24) were flat as compared to the year ago quarter, and down 76 per cent on a sequential basis.

Pre-sales at Rs 2,040 crore was largely from existing inventory projects such as the luxury offering Camellia (Rs 564 crore), One Midtown Delhi (Rs 659 crore) and independent floors in Gurugram (Rs 486 crore). The three together accounted for 83.7 per cent of the sales in the quarter. In addition to these, the Valley Garden project in Panchkula added Rs 127 crore to sales.

The company maintained its pre-sales guidance of Rs 12,000 crore to Rs 13,000 crore, riding on 11.2 million square feet of launches. The total sales potential of these launches is pegged at Rs 19,700 crore. In FY23, the company had launched 10.1 million square feet with a sales potential of Rs 14,600 crore. There is unsold inventory of Rs 5,600 crore.

Most brokerages expect the company to meet its FY24 guidance. “While the company clocked bookings, which were lower than the quarterly run rate of FY24 guidance, we expect them to comfortably exceed its full-year pre-sales guidance and report sales of at least Rs 15,000 crore,” say Pritesh Shah and Sourabh Gilda of Motilal Oswal Research.

A positive in the quarter was the improving cash flow situation which aided the reduction in debt. What helped was the rising collections at Rs 1,472 crore which was up 48.5 per cent year-on-yeay (YoY). This, coupled with 28 per cent increase in rentals to Rs 104 crore, led to operating cash inflow of Rs 1,575 crore while net cash flow (accounting for construction, marketing and acquisitions) stood at Rs 665 crore. The company’s cash balance moved up to just under Rs 3,000 crore and net debt for the development business came down to Rs 57 crore from Rs 721 crore at the end of the March quarter.

The key takeaway in the quarter was the company’s re-entry into the Mumbai market with a slum rehabilitation project in Andheri. While the overall size of the project is 3.5 million square feet, the first phase of the project has a saleable area of 0.9 million square feet with gross development value of over Rs 2,000 crore. DLF, which has invested Rs 400 crore in the project, has a 51 per cent stake in it.

Brokerages have a mixed view on the company’s Mumbai project. While Kotak Research has a wait and watch approach, Antique Stock Broking is positive. Say Biplab Debbarma and Alpesh Thacker of the brokerage, “With strong visibility of surplus cash flow, low level of debt, and no requirement of land acquisition in Gurugram, foraying into new geographies is a logical conclusion and augurs well for the company’s long-term growth aspirations.”

The brokerage believes that a partnership model will help the company understand market dynamics well before getting into any aggressive growth plans.

At the current price, the stock is trading at 29.3 times its FY25 earnings estimates. While Antique Stock Broking has a ‘buy’ rating, Motilal Oswal Research is ‘neutral’ on the stock as the 17 per cent rise in the price over the past three months, factors in the gains.