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Lehman Initiates Coverage on DLF

November 29, 2007

Lehman Brothers Equity Research has initiated coverage on India’s largest Real Estate company, DLF with an OVERWEIGHT rating. DLF is well poised to capitalise on the sector’s bright prospects. Rapid asset turnover has the potential to drive its financial performance. Lehman expects DLF to maintain its leadership in the sector due to the size and quality of its landbank and strong position in the high margin commercial/retail segments.

DLF’s landbank which, both in size and quality, is ahead of its peers. Execution capabilities demonstrated in its landmark projects and relationships with leading retail brands and corporates. Large proportion of development in commercial/retail segments, which give high margins and could benefit from potential yield compression. DLF has the capability to capture 7% of the total housing market and 15% of the non-residential market.

Here is the Sum of the Parts Valuation of DLF as estimated by Lehman Brothers.
Existing landbank NAV Rs 658 / share
Terminal value – Rs 215
Intermediate NAV – Rs 239
Value/share – Rs 1,112
Target Price – Rs 1,171 Implied multiple to NAV is 1.63

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