DLF rallies 19% in 9 days, nears 52-week high on hopes of healthy sales

Analysts anticipate residential sales momentum will remain healthy amid sustained demand and new launch offtake, despite rate hikes.

Shares of DLF gained 2 per cent to Rs 414.40 on the BSE in Thursday's intra-day trade on hopes of healthy sales volume growth, led by new launches. It was quoting higher for the ninth straight trading day, and has rallied 19 per cent during the period. The stock of the real estate developer was quoting close to its 52-week high level of Rs 418.45, touched on December 5, 2022.

Realty stocks have been outperforming the market ever since the Reserve Bank of India (RBI), last week, surprised the markets by pausing repo rate hikes, and left key interest rates unchanged.

Analysts expect the move to provide a further boost to demand, and particularly to the affordable and mid-income housing segments. Coupled with the Central Government also hiking its outlay for the PMAY program during this year’s Budget, industry experts expect the demand for affordable housing to grow in the upcoming quarters.

According to rating agency ICRA, DLF Group's strong operating performance in FY23 is expected to sustain in FY24, supported by continued end-user demand and good affordability.

DLF's liquidity is strong with around Rs 1,749 crore cash and liquid investments as on December 31, 2022. Strong sales from new launches as well as existing projects during 9MFY23 translated into healthy collections, while rendering visibility to future collections from the pending receivables, ICRA said in a rationale.

Significant revenue diversification from different segments and geographies, along with continued momentum in sales and collections, resulting in significant improvement in cash flows, leverage and liquidity position may trigger a rating upgrade, the rating agency said.

Further, according to analysts at ICICI Securities, sales volume growth for real estate companies is likely to be healthy in the near-term, led by launches. The commercial leasing, as well as malls and hospitality segment will be robust, with consumption remaining healthy.

The brokerage firm anticipates residential sales' momentum to remain healthy amid sustained demand and new launch offtake, despite rate hikes. However, the trend will be mixed led by respective player new launch momentum, it added.

Given that continuing monetization of the residual land bank could add incremental value to the company, Kotak Securities expects DLF to see strong activity on this front in the next few quarters. The brokerage firm factors-in accelerated sales from 'The Arbour' in its estimates, and maintains a 'BUY' rating with a revised face value of Rs 430/share (from Rs 400/share).