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DLF Sales Inline – Value Housing the new Landscape

November 2, 2009

DLF reported sales of Rs17.5bn, 6% growth qoq supported by 2m sq ft of sales in Delhi project. While the EBIDTA margin of 52% was higher than our expectation of 47%, net profit at Rs4.4bn was 9% below our estimate due to higher interest cost and taxes.

DLF plans to launch Value housing under a new brand to mark its entry into affordable housing. We think the move has been prompted by subdued demand for DLF’s mid income housing projects, while other developers have seen phenomenal demand for launches in affordable housing in last six months. DLF did not provide details on its affordable housing plans though it is looking to generate margin of 25-30% (against 35-40% in mid income housing) and targeting launch of ~4m sq ft in 2HFY10.

JP Morgan expects DLF to report 10.7 and 15 for FY 10 and FY11

BOFA-Merrill expects it to be 10.35 and 10.80 for FY10 and FY11 [ No growth for FY 11 ???]

While Goldman Sachs is the BIG BULL in this counter with expectations of Rs 14.5 and 20 for fy10 and fy11 respectively.

Citi expects DLF to report 11.7 and 14.4 for FY 10 and FY11.

Even if we take the average consensus as Rs 14 for FY11, the stock is trading at a whopping P/E of 27 discounting its FY11 earnings. AVOID BUYING at this Level.

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