DLF missed earnings estimates, despite reporting strong pre-sales from DLF-Phase V, especially Camellias.
Moreover, debt increased by a further R630 crore to R20,900 crore. Leasing portfolio continued to do well, which was the bright spot in an overall dismal picture. Management expects volumes to remain weak and cash flows negative for at least the next two quarters, which will preclude stock performance.
Revenue, at R1,950 crore (flat y-o-y), was 14% below ours and consensus estimates. Ebitda, at R700 crore, was 30% below our estimates and 24% below consensus. PAT, at R170 crore, fell 22% y-o-y and came in 27% below our estimates. It was a disappointing show in light of the strong pre-sales reported by the company.
DLF reported total pre-sales value of Rs 1,980 crore for the quarter as compared to Rs 1,880 crore for FY15.
Furthermore, bulk of these sales (R1,860 crore) was reported in DLF Phase V, Gurgaon, which would have warranted healthy revenue recognition and cash collection for the company. The bright spot remained the annuity portfolio, which reported revenue of R5,750 crore, and management guided annuity income to increase to R6,750 crore for Q4FY16, led by new asset completions and re-pricing of existing assets.
Regulatory challenges, weak demand environment in its key market, NCR and high debt – leading to negative cash flows – remain obstacles to stock performance. Maintain ‘hold/sector underperformer’ with target price of R150 per share compared to Rs 159 earlier.