Motilal Oswal has given Neutral recommendation for DLF with a target price of Rs. 375 in its research report issued on May 18, 2022

Motilal Oswal’s research report on DLF

Sales bookings grew by 2.6x YoY to INR27b (est. INR24b) in 4QFY22. It ended FY22 on a high, with the best ever pre-sales of INR73b (up 136% YoY). DLF received a strong response to 6msf of launches in FY22. The same contributed 63% to total sales, while its Ultra-Luxury Camellias project saw bookings worth INR26b (77 units, 35% of the total). DLF plans to launch 7.6msf/9.2msf of projects in FY23/FY24, which indicates a continuation in the growth momentum. We expect an 8% CAGR in presales to INR85b over FY22-24. While collections remained flat QoQ at INR13b, higher construction costs and overheads led to a decline in surplus cash flows to INR5.4b v/s INR7.6b in 3QFY22. Debt in DLF’s Residential segment declined further to INR27b.

Outlook

We incorporate this uncertainty, with a higher land development timeline, to average 21 years from 13 years earlier. We also raise our WACC to incorporate a higher risk free rate of 7.5%. We have lowered our TP to INR375 per share, implying a 15% upside. We maintain our neutral rating on the stock.

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