Shares of property developer DLF rose 7.7 per cent to Rs 247.80 after JP Morgan upgraded its rating on the stock to overweight, citing debt reduction and new projects as key reasons.
“Debt reduction and launch of luxury Gurgaon projects should boost core operating cash flows, thus returning the company into a surplus free cash flow zone,” said JP Morgan’s analysts Saurabh Kumar and Gunjan Prithyani. “We believe the company’s turnaround strategy of fixing execution, de-leveraging and focus back on performing North India markets should start bearing fruit henceforth,” they said.
The investment bank raised its price target for the stock by March 2014 to Rs 300 from Rs 220 by March 2013.
Launch of some luxury projects, more asset sales and rate cuts would be the main triggers for the stock over the next three months.
“Some of the key large transactions have already been concluded (NTC, Aman Resorts) generating Rs 4,300 crore in asset sales. The company now seems to be closer to its net debt target of Rs 18,500 crore by FY13 end,” the JP Morgan analysts said. “Going forward, as net debt reduces and cash flows from core operations pick up, we think free cash flows will cross into a positive zone. Additionally, rate reductions will help even more in containing interest cost,” they said.
