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Friday, May 27, 2011

DLF results analysis - Is it worth buying stocks?

DLF recently announced it’s numbers and DLF stock took a beating in stock market by tripping 3%. What is beneath the numbers and should you be out there buying stocks of DLF?

DLF stock was hammered by 3% on Thursday. Investment banking firms like Goldman Sachs and JP Morgan are certainly not bullish at all after looking at DLF numbers. DLF reported FY 2011 revenues at Rs 9560 crores, a tad below market expectations but way below market expectations when looked at EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) front. Rs 3,750 crore against an expectation of Rs 4,590 crore.

Sales volume was at 10 million square feet or Rs 6,600 crore against revised of 12 million square feet (initially it was 15 million sq. feet). In FY 2010, DLF had sold Rs.7000 crore worth of property. This shows decline in sales Y-O-Y. Company’s net pofit has declined by 5%. DLF management has given a guidance for residential real estate sales of 11-12 million square feet, mainly thru plotted development. Guidance for leasing is of 2.5-3 million square feet of commercial real estate in FY 2012 which would add Rs 1,300 crore to annual revenues.

Net debt company declared is at Rs 21,400 crore of which Rs 5,000 crore is earmarked for disinvestments. Rs 10,500 crore is for rent business and Rs 6,000 crore is for development business.

DLF, as a stock can turn profitable only if company manages to take action for reducing it’s debt, launching new projects, higher rentals from it’s commercial rent business. Company has thought of higher plotting based development for FY 2012-13 so it can reduce the cycle time and increase the margins.

It will not see any of the above happening in immediate to near term and so, the stock may see lower levels of stock price from current levels. It is advisable to not to buy stocks of DLF at this stage and wait for some more time till we see any positive triggers.

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