Target: ₹434
CMP: ₹339.05
DLF has seen strong traction in its residential business with 9MFY22 sales bookings of ₹4,540 crore driven by the Dec’21 launch of the One Midtown Delhi project. Accordingly, the company has revised its FY22 devco sales guidance to ₹6,000-6,500 crore (earlier ₹4,000 crore).
With the recent plotted development launch in Chennai, we model for ₹6,640 crore of FY22 devco sales and over ₹7,000 crore each in FY23-24. In the first phase, the company plans to launch 50 per cent of the area or 750 plots having ticket sizes ranging between ₹25-125 lakh.
Further, with office re-openings and mall consumption picking up, we expect DCCDL’s rental EBITDA to grow from ₹3,400 crore in FY22 to ₹4,050 crore in FY23. While the Omicron wave led to a slight delay in return-to-office plans, the company remains confident of a strong leasing pickup from FY23 with office portfolio occupancy levels to rise to over 90 per cent in H1-FY23.
The company’s plans to ready itself for a possible REIT listing of DCCDL remain on track.
We upgrade our rating to Buy from Add with an unchanged Mar’22 SoTP based target price of ₹434/share post the 13 per cent stock price correction in the last one month.
Key risks to our investment thesis are a slowdown in residential demand in NCR region and impact of Work-from-Home on leasing business resulting in higher-than-expected vacancies and decline in rentals.