DLF improves performance in Q3, analysts maintain ‘Buy’ with revised target price of Rs 216

DLF’s operational performance continued to improve in Q3FY19 with new sales coming in at Rs 560 crore (Rs 630 crore in Q2FY19); the company also made positive operational cash flow (post-capex ex-dividend) for the second quarter running. Management continues to focus on liquidating Rs 12,300-crore inventory and scaling up the rental portfolio (DCCDL). We maintain earnings estimates for the erstwhile merged entity (despite demerger of DCCDL) awaiting greater clarity on adjustments/reconciliation between DLF and DCCDL numbers (post-demerger). We roll over valuation to FY21E and maintain ‘BUY’ with revised TP Rs Rs 254 earlier).

Gross sales stood at Rs 800 crore (Rs 780 crore in Q2FY19), while net sales (adjusted for cancellation/upgradation) stood at Rs 560 crore (Rs 630 crore in Q2FY19). Management indicated that the quantum of cancellations should decline going ahead. DLF is on track to exceed its target of Rs 2,000 crore–2,250 crore net sales in FY19 (Rs 1,000 crore in FY18). It generated a positive operational cash flow (post capex and ex-dividend) of Rs 2 crore during Q3FY19. This is the second consecutive quarter of positive cash flow for DLF.

Net debt for the DLF Group (ex-DCCDL) at end-Q3FY19 stood at Rs 7,220 crore, marginally up q-o-q. The company has ~Rs 3,000 crore of pending receivables from sales already made and expects to incur another ~Rs 2,300 crore as construction cost (including the allied infrastructure), thus resulting in surplus receivable of ~ Rs 70 crore from sold inventory. It expects the liquidity situation to improve further post Rs 2,250-crore fund infusion by promoters and the proposed QIP. Management believes that ongoing liquidity issues in the industry are boosting opportunities for well-funded developers like DLF. We expect DLF’s operations to maintain its upwards trajectory in coming quarters.

DLF Ltd