"DLF's reported 3QFY09 numbers were below expectations with revenue at Rs 13.6 billion versus our estimates of Rs 32.5 billion and net profit at Rs 6.7 billion versus our estimates of Rs 14 billion.
In 3QFY09, the management has adopted several critical measures to effectively deal with the downturn.
It has:
1) put on hold 26% of its ~62msf of ongoing projects aggregating to 16msf (commercial 12msf and retail 4msf) for lack of project financing,
2) guided for substantial delay in sales to DAL for the remaining 10msf of commercial projects,
3) postponed all new launches for the retail lease vertical,
4) suspended all hotel projects other than projects under Hilton JV for lack of funds."
The report also says, "Our FY10 NAV for DLF is Rs 211/sh. Our NAV does not include potential value creation from
i) Bidadi and Dankuni project,
ii) value creation possibility from subsidiary companies in the construction, life insurance and entertainment business, and
iii) potential value unlocking from large SEZs. We view DLF as one of the best managed real estate company in India due to its robust business model. Buy,"says Motilal Oswal's research report.
Read Earlier One: Top Stock in Real Estate Sector - DLF Real Estate - Motilal Oswal Report
Important Statistics:
Shareholding pattern
Total shareholding of Promoter and Promoter Group (A): 88.26%
Total Public shareholding (B): 11.74%
Mkt Cap: 26,604.87
P/E: 12.33
Div: 200.00
EPS (TTM): 12.67
B/V: 66.18
Mkt Lot: 1.00
FV: 2.00
Valuation and view
We have lowered our FY10 NAV for all RE companies in our coverage universe to account
for:
(1) further delay in project launches and completion across verticals,
(2) lower price assumptions across all projects across verticals, and
(3) higher cap rates for the commercial and retail projects.
Due to the virtual paralysis in the real estate sector since November 2008, we believe 4QFY09 could be worse than 3QFY09 and we expect FY09-10 to be a period of
consolidation, in which industry leaders would be differentiated from peers. We believe developers with staying power would utilize this consolidation phase to emerge stronger. Focus on companies with:
(1) high visibility on monetization of assets over the next 3-5 years,
(2) low leverage and robust financials, and
(3) strong execution track record.
Top stock to buy remains DLF.
Download the report on Real estate sector from Motilal Oswal.
