Strong launch pipeline factored into realty major DLF's valuations

Real estate major, DLF, has reported its highest-ever presales of Rs 9,050 crore in Q3FY4, which was up 4 times over the year-ago quarter and well above its estimates.

This was driven by three new launches, which contributed Rs 8,600 crore to overall bookings. For 9MFY24, bookings stood at Rs 13,300 crore, which was twice year-on-year (Y-o-Y) and exceeded the full-year guidance of Rs 13,000 crore with three months to spare.

The first phase of DLF Privana, Gurugram, was sold out within 72 hours of launch with bookings of over Rs 7,200 crore. Other launches in Gurugram and Panchkula contributed Rs 1,400 crore of pre-sales.

With no further launches planned, DLF may end FY24 with presales of Rs 15,400 crore. Given projects of over Rs 70,000 crore to launch over three years, DLF could report 27 per cent annual growth in pre-sales over FY24-FY26 to Rs 25,000 crore.

Collections hit an all-time high of Rs 2,600 crore, up 80 per cent Y-o-Y. Operational cash flow (OCF) grew by 45 per cent to Rs 1,100 crore due to higher construction spending.

In 9MFY24, DLF collected Rs 6,600 crore and generated Rs 3,200 crore of OCF.

The revenue grew 2 per cent Y-o-Y and 13 per cent Q-o-Q to Rs 1,500 crore but this was below estimates.

The operating profit stood at Rs 510 crore, up 7 per cent Y-o-Y (up 11 per cent Q-o-Q), with a margin of 34 per cent (versus 32 per cent in Q3FY23).

The net profit was up 26 per cent Y-o-Y at Rs 660 crore driven by higher other income and a 27 per cent rise in JV profit contribution from DCCDL.

The rental income in DCCDL’s commercial portfolio increased by 8 per cent Y-o-Y to Rs 1,100 crore with a 21 per cent rise in retail income.

Office rentals grew 6 per cent Y-o-Y.

The occupancy increased 200 basis points Y-o-Y to 92 per cent.

Non-SEZ vacancy was flat at 97 per cent while SEZ vacancy dropped 100 bp to 84 per cent.

After the recent amendment in the SEZ Act, DLF has already applied for a floor-wise denotification of 1.1 million sq feet of SEZ space (out of 2.4 msf vacant), which will boost occupancy over 6-12 months.

Rentals at two towers (total 2.3msf) at Downtown Chennai will commence from Q1FY25 and pre-leased Standard Chartered Tower (1msf) from Q4FY25. Rentals will start flowing from Tower 4 at Downtown Gurugram from Q1FY26. The DCCDL is on track to hit a rental run rate of Rs 5,100-5,200 crore by FY25 due to these rentals.

Management guided that project launches for FY25 include a luxury project in DLF 5, a new phase of Privana, a high-rise project in Chennai, and the first phase of a Mumbai project. In addition, there will be small projects in Goa and Panchkula.

Blended margins may increase to 45-50 per cent versus 35 per cent currently.

DLF has acquired 29 acres by taking over Rs 850 crore of debt from the lenders to IREO Developers.

The land parcel is located on the Golf Course Extension Road with a potential of 7.5msf. DLF will spend Rs 2,500 per square feet to take complete ownership and plans to launch the project in the next 12 months.

The launch of the 2nd phase of DLF Privana will be in March 2024.

DLF’s land bank provides visibility with an assumption of 12-13 years for the full monetisation of the existing 160 million square feet land bank.

Assuming 8-10 per cent annual growth in prices in that period, the business seems fully valued.