DLF's 3Q results were flat yoy, although debt rose as cash from operations was utilized in land replenishment and preference-share redemption. Sales & leasing momentum sustained, with ~`15bn worth of stock sold and 1.62m sqft leased. Management guided for big launches in 4Q. We lower our Mar '12e price target to `309 from `368. Maintain Buy.
n Flat 3QFY11. DLF's 3Q revenue was `24.8bn and PAT was `4.7bn (vs. our estimate of `22bn and `4.2bn respectively). Although DLF generated cash from operations, given some land consolidation and preference-share redemption, debt increased by `3.1bn. Also, there is a new tax assessment for `11.8bn.
n Operations update. Space of 2.48m sqft was sold for ~`15bn in 3Q; but launches were low, citing approvals. Leasing maintained momentum with 1.62m sqft leased (cumulative 4.3m sqft YTDFY11 has already crossed FY11 guidance). Launch plans of 8m sqft (only post approvals) would provide the required volume push; but we expect management to fall short of FY11 sales guidance of 12-15m sqft.
n Change in estimates. For DLF, too, we change our approach (as we have for the sector) and consider only projects paid for and in possession of DLF. Hence, we cut the new land acquisition in Gurgaon and re-adjust our land portfolio, shifting certain land parcels to residual land bank, failing clarity about launch.
n Risks. Delay in launches and slowdown in sales.
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
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