DLF stock nears two-year high; surges 15% in one week

Shares of DLF traded near its two-year high of Rs 254, up 4 per cent on the BSE on Monday on the back of heavy volumes on expectation of earnings improvement.

The stock of real estate developer traded higher for the fifth straight day and quoted at its highest level since February 1, 2018. In the past one week, it has rallied 15 per cent, as compared to a 3 per cent rise in the S&P BSE Sensex. 

The trading volumes on the counter jumped 1.6 times with a combined 14.2 million equity shares changed hands on the NSE and BSE. The stock eventually closed at Rs 252 apiece on the BSE, up over 3 per cent. 

DLF, while announcing July-September quarter results on November 7, 2019, said it has witnessed encouraging response from the market for its completed inventory, especially in the micro markets of DLF5/New Gurgaon in Gurugram. The management said the company remains focussed on monetising the finished inventory.

The company further said Q2FY20 witnessed a significant transformation of the capital structure, resulting into a very healthy balance sheet for the Company. Pursuant to the settlement of inter-company payables, the net debt for the Company stood at Rs 4,461 crore at the end of the quarter and is committed to reduce in the near term.

Analysts at JP Morgan believe DLF’s residential business is attractive as the business will likely reach zero debt by FY21.

“We think developers with completed inventory should be rather well placed to capture a demand upturn. DLF’s market position in this place is now becoming enviable with almost minimal competition in this market given tremendous financial stress at its erstwhile competitors,” the foreign brokerage firm said.

It believes the residential downcycle that started in 2011 ended in 2017 are now in the early stages of a new upcycle. This cycle is backed by multi-year high affordability across major cities and mortgage rates that are now nearing a ‘psychological’ low 7 per cent handle. This is also borne out in positive news flow by various developers that have announced sell-out responses to projects over the last three months.