Buy DLF, target Rs 258: HDFC Securities

HDFC Securities has given a buy recommendation on DLF with a target price of Rs 258.

Shares of DLF traded at Rs 192.6 around 2:35 pm on 24 May, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

The Q4FY19 revenue came in 16 per cent and Ebitda at 15 per cent ahead of our estimate, APAT was lower by 13 per cent, the brokerage said.

DLF achieved Rs 650 crore net pre-sales during Q4FY19. Overall FY19 pre-sales stood at Rs 2,440 crore (up 144 per cent YoY). As per the brokerage, the company has guided Rs 2,700 crore pre-sales for FY20E, which will be contributed by Phase V – Rs 800 crore, Ultima – Rs 700 crore, built to suit ROG – Rs 350 crore and National Devco rest.

With the transfer of Mall of Noida, Saket and Horizon to DCCDL, cumulative rental addition will be Rs 450 crore. Further, new assets Cyber Park and Chennai IT SEZ will add Rs 450 crore (2HFY20E), the brokerage said.

As per the brokerage's estimate, over the last two years, DLF has achieved significant BS deleveraging with net D/E likely hitting 0.1 times by FY20E end. Pre-sales recovery is on track with 4.7 years of unsold completed inventory.

DLF maintained that it will launch projects during advance stage of completion. Hines JV is on track with construction commencement by Dec-19. Sales strategy here will be mix of strata sales and leasing, said the brokerage.

The new construction of DLF phase-V will start in December 2019 and will cater to Crest type product.

"With strong balance sheet, robust lease momentum and residential pre-sales recovery, DLF is well placed. We maintain buy," said the brokerage, adding, "delay in ready inventory monetization, high interest rates and rental correction are the key risks for the company,".