dlf idbi

COMPANY

REPORT

November 1, 2013

DLF Ltd.

Subvention receipts lead to better operating cash flow

RESULTS

REVIEW

CMP Rs152

Target Price Rs170

Potential Upside/Downside +12%

Relative to Sensex

Result Highlights

Mixed operational performance: New sales at Rs7.3 bn; net leasing at 0.61 msf

DevCo new sales was below our estimate at Rs7.3 bn (Rs31.6 bn in H1FY13), largely on account of

lower than expected pre-sales in New Gurgaon. The management expects to achieve sales of

Rs15-17bn in New Gurgaon in H2FY14 (led by 2 new launches) and has maintained its FY14 new

sales guidance at Rs60 bn. During the quarter, DLF launched Camelias project in Phase V, which

achieved a pre-sales of ~Rs2.5 bn. Leasing was strong at 0.61msf, taking the total area leased in

H1FY14 to 1 msf (1.1 msf in FY13).

Adjusted PAT significantly below estimate at Rs204 mn

Revenue was 8% below estimate at Rs19.6 bn (-16% QoQ / -11% YoY). However, due to lower than

expected OPM of 30.4% (39.6%/48.6% in Q1FY14/Q2FY13), EBITDA was 30% below our estimate

at Rs5.9 bn. The management expects OPM to return to 45-50% level once the Phase V projects and

Noida Mall start contributing to the revenues. Adj. PAT was significantly below estimate at Rs204 mn

due to the EBITDA miss and higher tax rate of 51%. Interest expense was up 3% QoQ to Rs6.1 bn.

CFO turns positive on receipt of ~Rs5 bn from interest subvention scheme

Due to one-time receipt of Rs5 bn from interest subvention scheme of Crest project, cash flow from

operations (CFO) turned positive to Rs7.1 bn (negative Rs4.3 bn in Q1FY14). Also, the company

received Rs6.6 bn from sale of non-core assets (wind mill and insurance business). Consequently,

net debt declined by Rs6.9 bn QoQ decline to Rs198.9 bn. The management is currently working on

a divestment pipeline of Rs30 bn including Aman Resort, and believes it should be able to meet the

net debt target of Rs175 bn by FY14-end even if they are not able to close the Aman deal.

Maintain HOLD; TP stays at Rs170

We believe DLF will continue to disappoint on the debt reduction front as collections (and therefore

the operational cash flow) is unlikely to improve significantly in the near term. Consequently, a large

portion of cash flows received from sale of non-core assets will be utilized towards meeting the

negative operating cash flow (management expects the company to become CFO positive from

Q3FY14 onwards). We maintain our HOLD rating on DLF; TP stays at Rs170.

Source: Capitaline

HOLD

Nifty: 6,299; Sensex: 21,165

Analyst

Hansraj Singh, CFA

+91-22-4322 1368

[email protected]

Sector Realty

Bloomberg / Reuters DLFU IN / DLF.BO

Shares o/s (mn) 1,779

Market cap. (Rs mn) 2,70,408

Market cap. (US$ mn) 4,397

3-m daily average vol. 14,89,370

Key Stock Data

52-week high/low Rs289/120

-1m -3m -12m

Absolute (%) 18 1 (25)

Rel to Sensex (%) 9 (8) (40)

Price Performance

Promoters 75.0

FIIs/NRIs/OCBs/GDR 19.8

MFs/Banks/FIs 0.3

Non Promoter Corporate 0.9

Public & Others 4.0

Shareholding Pattern (%)

Table: Financial snapshot (Rs mn)

Year Revenue EBITDA EBITDA (%) Adj. PAT EPS (Rs) P/E (x) EV/EBITDA (x) RoE (%) RoCE (%)

FY12 96,294 39,038 40.5 12,008 7.1 21.5 13.2 7.0 4.5

FY13 77,728 26,262 33.8 7,119 4.2 36.2 19.4 6.6 4.6

FY14E 73,144 31,818 43.5 6,175 3.5 43.8 15.4 4.7 4.6

FY15E 84,680 36,836 43.5 10,044 5.6 26.9 13.2 2.7 2.9

Source: Company; IDBI Capital Research

40

60

80

100

120

140

160

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

DLF Sensex

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2

Q2FY14 Result Review DLF Ltd.

Table: Quarterly and annual performance (Rs mn)

Year-end: March Q1FY14 Q2FY14 % Chg QoQ Q2FY13 % Chg YoY

Revenue 23,141 19,561 (15.5) 21,977 (11.0)

Operating expenditure 13,985 13,613 (2.7) 11,307 20.4

EBDITA 9,156 5,948 (35.0) 10,670 (44.3)

EBDITA margin (%) 39.6 30.4 - 48.6

Depreciation 1,782 1,660 (6.9) 1,786 (7.1)

Other income 1,391 2,685 93.0 1,311 104.8

Interest 5,914 6,091 3.0 6,226 (2.2)

Exceptional items 58 797 - 0 -

PBT 2,909 1,680 (42.3) 3,970 (57.7)

Tax 913 855 (6.4) 1,137 (24.8)

Tax rate 31.4 50.9

28.6

PAT 1,996 825 (58.7) 2,833 (70.9)

Minority interest (245) 127 (151.8) 74 71.2

Share of profit/(loss) in associates 73 10 (86.0) 36 (71.7)

Prior period adjustments (net) (12) 39 (410.5) (15) (356.7)

Net profit 1,812 1,001 (44.8) 2,928 (65.8)

Adj. Net profit 1,754 204 (88.4) 2,928 (93.0)

Net profit margin (%) 7.8 5.1

13.3

Source: Company

Table: Actual v/s estimates (Rs mn)

Year-end: March Q2FY14 Q2FY14E % Variance

Revenue 19,561 21,300 (8.2)

EBITDA 5,948 8,520 (30.2)

EBDITA margin (%) 30.4 40.0

Adj. Profit 204 1,284 (84.1)


Table: NAV and target price

Rs mn Rs/share Comments

Residential, Retail and commercial sales 1,93,723 109

Market value of land 2,06,169 116 Valued at Rs1,000 psf less balance payment

Value of Rental assets 98,942 56 Rental portfolio of 24 msf; valued at 11% cap rate

GAV 4,98,834 280

Less: Net Debt (1,95,951) (110)

NAV 3,02,883 170





3

Figure: Sales booking of 0.91 msf (Rs7.3 bn) and net leasing of 0.61 msf in Q2FY14

Source: Company

Figure: Net debt down by Rs6.9 bn QoQ to Rs198.9 bn in Q2FY14 (Rs bn)

Source: Company

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

0.00

1.00

2.00

3.00

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5.00

6.00

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8.00

Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

(msf)(m

sf)

Devco sales (LHS) Net leasing (RHS)

216.8 224.3 226.4 227.6

242.7 237.8 235.5 228.3 232.2 214.1 217.3 205.7 198.9

0.0

50.0

100.0

150.0

200.0

250.0

300.0

Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14



4


Financial Summary

Profit & Loss Account (Rs mn)

Year-end: March FY12 FY13 FY14E FY15E

Net sales 96,294 77,728 73,144 84,680

Growth (%) 0.7 (19.3) (5.9) 15.8

Operating expenses (57,256) (51,466) (41,326) (47,844)

EBITDA 39,038 26,262 31,818 36,836

Growth (%) 4.0 -32.7 21.2 15.8

Depreciation (6,883) (7,962) (6,815) (6,425)

EBIT 32,155 18,300 25,003 30,411

Interest paid (22,465) (23,140) (21,501) (22,001)

Other income 5,785 12,899 4,750 4,750

Pre-tax profit 15,475 8,058 8,252 13,160

Tax (3,694) (1,251) (1,672) (2,666)

Effective tax rate (%) 23.9 15.5 20.3 20.3

Net profit 11,781 6,807 6,580 10,494

Adjusted net profit 12,008 7,119 6,175 10,044

Growth (%) (26.8) (40.7) (13.3) 62.6

Shares o/s (mn nos) 1,697 1,697 1,779 1,779

Balance Sheet (Rs mn)


Net fixed assets 293,316 276,829 240,513 225,588

Investments 11,268 13,337 13,337 13,337

Other non-curr assets 3,349 6,563 6,563 6,563

Current assets 325,961 349,538 369,646 401,722

Inventories 161,756 176,455 191,455 206,455

Sundry Debtors 19,100 17,393 16,823 19,476

Cash and Bank 15,062 18,441 18,119 26,543

Loans and advances 51,741 53,304 55,304 57,304

Total assets 633,894 646,267 630,060 647,211

Shareholders funds 254,366 257,283 275,992 279,329

Share capital 3,395 3,395 4,205 4,205

Reserves & surplus 250,970 253,888 271,787 275,124

Total Debt 250,660 248,010 215,010 220,010

Curr Liab & prov 114,700 126,288 123,835 133,328

Current liabilities 106,669 118,961 117,044 125,858

Provisions 8,032 7,327 6,791 7,470

Total liabilities 379,529 388,984 354,068 367,882

Total equity & liabilities 633,894 646,267 630,060 647,211

Book Value (Rs) 144 144 150 152


Cash Flow Statement (Rs mn)


Profit after tax 12,008 (1,340) 6,175 10,044

Depreciation 6,883 7,962 6,815 6,425

Chg in working capital (15,987) (17,453) (22,346) (14,839)

Other operating activities (2,410) - - -

Cash flow from operations (a) 494 (10,830) (9,356) 1,629

Capital expenditure (2,172) 7,898 29,500 8,500

Chg in investments (1,310) (2,069) - -

Other investing activities - - - -

Cash flow from investing (b) (3,482) 5,829 29,500 8,500

Equity raised/(repaid) - - 18,630 -

Pref capital raised/(repaid) - - - -

Debt raised/(repaid) 10,757 (2,650) (33,000) 5,000

Dividend (incl. tax) (4,806) (5,287) (6,096) (6,706)

Other financing activities - - - -

Cash flow from financing (c) 5,951 (7,937) (20,466) (1,706)

Net chg in cash (a+b+c) 2,963 (12,938) (322) 8,423

Financial Ratios


Adj. EPS (Rs) 7.1 4.2 3.5 5.6

Adj. EPS growth (%) (26.8) (40.7) (17.3) 62.6

EBITDA margin (%) 40.5 33.8 43.5 43.5

Pre-tax margin (%) 16.1 10.4 11.3 15.5

ROE (%) 7.0 6.6 4.7 2.7

ROCE (%) 4.5 4.6 4.6 2.9

Turnover & Leverage ratios (x)

Asset turnover (x) 0.2 0.1 0.1 0.1

Leverage factor (x) 2.5 2.5 2.4 2.3

Net margin (%) 12.5 9.2 8.4 11.9

Net Debt / Equity (x) 0.9 0.9 0.7 0.7

Working Capital & Liquidity ratios

Inventory days 613 829 955 890

Receivable days 72 82 84 84

Payable days 165 191 190 193

Valuation


PER (x) 21.5 36.2 43.8 26.9

Price / Book value (x) 1.0 1.0 1.0 1.0

PCE (x) 13.7 17.1 20.8 16.4

EV / Net sales (x) 5.4 6.6 6.7 5.7

EV / EBITDA (x) 13.2 19.4 15.4 13.2

Dividend Yield (%) 1.6 1.8 1.9 2.1




5

Notes

Sonam H. Udasi Head Research (91-22) 4322 1375 [email protected]

Dealing (91-22) 6637 1150 [email protected]

Key to Ratings

Stocks:

BUY: Absolute return of 15% and above; ACCUMULATE: 5% to 15%; HOLD: Upto 5%; REDUCE: -5% to -15%; SELL: -15% and below.

IDBI Capital Market Services Ltd. (A wholly owned subsidiary of IDBI Ltd.) Equity Research Desk

3rd Floor, Mafatlal Centre, Nariman Point, Mumbai 400 021. Phones: (91-22) 4322 1212; Fax: (91-22) 2285 0785; Email: [email protected] SEBI Registration: NSE CM INB230706631, NSE F&O INF230706631, BSE CM INB010706639, BSE F&O INF010706639, NSDL IN-DP-NSDL-12-96 Compliance Officer: Christina Fernandes; Email: [email protected]; Telephone: (91-22) 4322 1212 Disclaimer This document has been prepared by IDBI Capital Market Services Ltd (IDBI Capital) and is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. No person associated with IDBI Capital is obligated to call or initiate contact with you for the purposes of elaborating or following up on the information contained in this document.

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The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. In so far as this report includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.

Opinions expressed are current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis, the information discussed in this material, IDBI Capital, its directors, employees are under no obligation to update or keep the information current. Further there may be regulatory, compliance, or other reasons that prevent us from doing so.

Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.

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