Realty major DLF Ltd shares rose sharply on the bourses on Tuesday, after India?s largest real estate company by market capitalisation announced better than expected Q1 results.
The DLF share rose nearly 8% on the BSE to close at R149.60. While the company reported a 38% y-o-y decline in consolidated net profit at R181.19 crore, its topline grew by 5% to R2,314.08 crore, which was above the Street?s expectation of R2,063 crore.
DLF was not the only realty scrip that gained on Tuesday. Oberoi Realty (9.93%), DB Realty (4.98%) and Anant Raj (6.44%) were among the major gainers. The BSE Realty Index gained nearly 4.5% on Tuesday.
Domestic brokerages Motilal Oswal (MOFSL) and IIFL maintained a ?buy? rating on DLF?s stock. MOFSL upgraded the company?s FY14/15 EPS by 7-11% ?to factor in better operating profits from the non-core business (hotel) and potential cost savings after divestment of the insurance business by 2HFY14?. HDFC Securities revised its rating to ?buy? with a target price of R209.
However, other brokerages see the sharp rise in the stock?s price as a temporary bounce back. Year-to-date, the Gurgaon-based company has seen its shares fall 35%. ?The stock has been beaten down heavily. While the sales figures reported by the company were positive, the company?s huge debt is still a concern,? said Vishal Jajoo, senior research analyst, Nirmal Bang Securities.
DLF?s net debt stood at R20,369 crore at the end of June quarter, against R21,731 crore in the quarter ended March. The company aims to bring the net debt down to R17,500 crore by the end of FY14.
According to market experts, smaller real-estate players with low debt on their balance sheets are in a better position as compared to their highly-leveraged counterparts. ?Certain realty majors are using a bulk of their earnings to service debt,? said an analyst on condition on anonymity.
In a conference call on Tuesday after market hours, DLF management told analysts about the company?s plans to raise R900-1000 crore through commercial mortgage-backed security (CMBS) on two of its retail assets. The issue, which is expected to get a rating of between AA and AA-, would offer coupon rate between 10.7-11%.
