DLF: Mid Income Housing – Zindabad
Excerpts after talking to the DLF management. Investors appear concerned about (1) the delay in the DLF Offices Trust (DOT) listing on commercial business, (2) DLF’s financial leverage, (3) DLF’s ability to ramp up its residential segment, and (4) financial estimates. Commercial segment continues to see strong momentum and monetizing this through DOT will just be a timing issue. On the residential front, DLF has shifted its focus to mid income housing and large pre-sales provide revenue visibility.
Revenue estimates stands revised to Rs152.7 bn for FY2008E (Rs152.9 bn earlier), Rs203.9 bn for FY2009E (Rs201 bn earlier), and Rs255.1 bn for FY2010E (Rs241.4 bn earlier). PAT estimates are revised to Rs93.9 bn for FY2008E (Rs93.8 bn earlier), Rs123.4 bn for FY2009E (Rs123.3 bn earlier), and Rs141.5 bn for FY2010E (Rs143.6 bn earlier).
Target price of Rs1,220/ share is based on our Mar’09-based NAV of Rs815/share and a terminal value of Rs406/share.
HDIL has sold its project named Kaledonia situated at Andheri (East) to Mack Star Marketing Pvt. Ltd for Rs9 bn.The sale price of Rs20,000/sq. ft is in line with market.
Revenue estimates stand revised to Rs24.0 bn for FY2008 (Rs19.4 bn earlier) and Rs28.8 bn for FY2009 (Rs34.0 bn earlier).PAT estimates to Rs13.9 bn in FY2008E (Rs10.5 bn earlier) and Rs15.8 bn in FY2009E (Rs18.9 bn earlier). HDIL pursue growth opportunities as well as invest in its airport slum rehabilitation project. Kotak retains target price of Rs1,200/ share and BUY rating.
Here is ICICI’s recommendation on HDIL. We are more inclined to go with Kotak’s reasonable valuation and recommendation.