DLF

Results in line, sales momentum continues

May 17, 2010 „ In-line with expectations, flat sequentially: DLF revenues remained flat during

Q4FY10 Result Update

the quarter on a sequential basis. However, it witnessed a strong increase of 70%
on a YoY basis to Rs19.9bn. Margins increased to 50% vis-a-vis 41.6% in Q3FY10.
An increase in the company’s debt levels, which was primarily taken to buy out
the CCPS held by a private equity firm, SC Asia, led to an increase in the interest
Please mark your calendar cost by 22.5% on a sequential basis. PAT before minority interest and
Thursday May 20, 2010 @ The Trident
adjustments remained flat sequentially at Rs5bn. However, reported PAT
PL Mid-Cap Day witnessed a decline of 21% on account of adjustments of certain prior period
For participation call: +91-22-6632-2231 items.

„ Residential sales exhibit strength, commercial lags behind: Sales momentum in

the residential segment continued during the quarter, with the company clocking
in sales on 3.64m sq.ft as against 3.12m sq.ft in Q3FY10. The Panchkula launch of
2m sq.ft was the largest contributor to sales, with the entire project being sold
out. SBM Phase-3, Bangalore, Goa, New Gurgaon, as well as Gurgaon Phase V
Rating Accumulate
were the rest of the contributors. In the commercial segment, there was a slight
Price Rs299 improvement, with the company leasing 0.7m sq.ft during the quarter as against
Target Price Rs376 0.4m sq.ft in Q3FY10. However, overall, within the commercial segment, the
Implied Upside 25.9% pick-up has been at a much slower rate than expected.
Sensex 16,995 „ DLF Assets (DAL) integration led to an increase in debt levels: With the
(Prices as on May 14, 2010)
integration of DAL, as well as DLF buying out 90% of SC Asia’s stake in DAL, the
company’s gross debt has increased from Rs171.6bn in Q3FY10 to Rs216bn
currently. This translated to a DER (considering gross debt) of 0.7. Although SC
Asia’s stake was bought out after the close of the financial year, the funding was
Trading Data
in place prior to that and hence, the debt reflects the same. Post the buy-out,
Market Cap. (Rs bn) 9,349.4 DER is likely to peak at 0.78.
Shares o/s (m) 31,295.0
„ Valuations: DLF’s NAV as estimated by us stands at Rs418. We are revising our
3M Avg. Daily Vol (‘000) 11,516.8 target price to adjust for the discount that is attributed to DLF’s peer set. We
3M Avg. Daily Value (Rs m) 3,565.8 are basing our target price of Rs376 on a 10% discount to the company’s NAV. We
maintain ‘Accumulate’ on the stock.

Key financials (Y/e March) FY09 FY10E FY11E FY12E

Revenues (Rs m) 100,354 74,209 113,010 145,799
Stock Performance
Growth (%) (30.5) (26.1) 52.3 29.0
(%) 1M 6M 12M EBITDA (Rs m) 55,900 35,012 56,505 74,357
Absolute (9.5) (20.9) 15.7 PAT (Rs m) 44,696 17,300 41,194 55,954
EPS (Rs) 26.3 0.6 1.3 1.8
Relative (6.1) (20.6) (23.9)
Growth (%) (42.5) (97.9) 138.1 35.8
Net DPS (Rs) 2.0 3.0 3.5 4.0
Source: Company Data; PL Research

Price Performance (RIC: DLF.BO, BB: DLFU IN) Profitability & valuation FY09 FY10E FY11E FY12E
(Rs) EBITDA margin (%) 55.7 47.2 50.0 51.0
525 RoE (%) 20.4 6.3 15.3 29.3
475 RoCE (%) 14.6 6.7 9.6 20.4
425 EV / sales (x) 6.6 128.8 85.4 66.9
375
EV / EBITDA (x) 11.8 273.0 170.8 131.1
325
PE (x) 11.3 540.4 227.0 167.1
275
225 P / BV (x) 2.1 30.4 40.5 61.8
175 Net dividend yield (%) 0.7 1.0 1.2 1.3
125
Source: Company Data; PL Research
Mar-09

Nov-09
May-09

Jul-09
Jan-09

Jan-10
Sep-09

Kejal Mehta Dhrushil Jhaveri

[email protected] [email protected]
Source: Bloomberg +91-22-6632 2246 +91-22-6632 2232
 DLF

Q4FY10 Result Overview (Rs m)

Y/e March Q4FY10 Q4FY09 YoY gr. Q3 FY10 FY10 FY09 YoY gr.
(%) (%)
Sales 19,944 11,223 77.7 20,258 74,209 100,354 (26.1)
Expenditure
Cost of revenue 6,071 5,777 5.1 7,959 25,841 32,295 (20.0)
% of Net Sales 30.4 51.5 39.3 34.8 32.2
Other expenses 2,682 2,526 6.2 2,577 8,665 7,622 13.7
% of Net Sales 13.4 22.5 12.7 11.7 7.6
Staff Costs 1,191 1,375 (13.4) 1,289 4,691 4,537 3.4
% of Net Sales 6.0 12.2 6.4 6.3 4.5
Total Expenses 9,944 9,677 2.8 11,825 39,197 44,454 (11.8)
EBITDA 10,000 1,546 546.9 8,433 35,012 55,900 (37.4)
EBITDA Margin (%) 50.1 13.8 41.6 47.2 55.7
Depreciation 947 516 83.4 800 3,246 2,390 35.9
Other Income 1,518 2,291 (33.8) 1,260 4,333 3,960 9.4
EBIT 10,571 3,320 218.4 8,894 31,766 53,511 (40.6)
Less: Interest 3,147 1,625 93.6 2,568 11,075 5,548 99.6
PBT 7,424 1,695 337.9 6,325 25,024 51,922 (51.8)
Tax 2,362 (2) 1,684 6,957 6,754 3.0
Effective Tax Rate (%) 31.8 -0.1 26.6 27.8 13.0
PAT 5,062 1,697 198.3 4,641 18,067 45,168 (60.0)
Minority Interest-Share of Loss/(Profit) 28 (100) NA 29 98 (275) NA
Profit /Loss of Associates 47 (7) NA (40) 5 (211) NA
Prior Period Items (873) - (49) (870) 14 NA
Net Profit 4,264 1,591 168.1 4,679 17,300 44,696 (61.3)

May 17, 2010 2

 DLF

Highlights

Sales

During the year, DLF booked sales to the tune of Rs71.5bn. This translated to
total volumes of 12.55m.sq.ft as against its earlier sales target of
14-15m sq.ft. The company had an extremely strong rate of sales as
compared to its launches for FY10 which stood at 85%.

DLF’s sales performance in FY10

Area launched (msf) Area so ld (msf)

6.00
5.17
5.00 4.56
4.21
3.90
4.00 3.50
3.12
3.00

2.00 1.32
1.00
-
-
Delhi DLF City & New Panchkula, New Gurgaon,
Gurgaon Bangalore, Goa Kochi, Indore

Source: Company Data

The company’s sales momentum, unlike peers (for peers sales were stronger
in H1FY10 on account of greater launches), picked up in the second half of
FY10, where the company averaged at 3.4m sq.ft/quarter as against an
average of 2.7m sq.ft/quarter in H1FY10.

Quarterly Sales Performance

4.50
2009 2010
3.64
3.75
3.12
3.00 2.67 2.79
2.74
(m sq. ft)

2.13
2.25

1.50
0.70 0.77
0.75

0.00
Q1 Q2 Q3 Q4

Source: Company Data

May 17, 2010 3

 DLF

For FY11, the company has a sales target of 15-18m sq.ft, where the bulk of
the volumes are to be contributed by the mid-income and value-housing
segment. However, to boost the margins, the company also plans to focus on
the high-end and luxury segment which has seen a good pick-up in demand.

Expected sales in FY11

Type Area (m sq.ft) Locations
Luxury 1-1.5 Mumbai, Delhi
City Centre, High end 2-3 Chennai, Cochin, Gurgaon
Mid income / Value housing 12-14 Gurgaon, Hyderabad, Kochi,
Chandigarh
Total 15-18 msf
Source: Company Data

Strong rental portfolio, post DAL merger

Post the merger of DAL and Caraf (a subsidiary of DLF) with DLF, the
company has one of the largest rental portfolios of 19m sq.ft. This is likely to
translate to a rental income of Rs16bn annually. Besides, with the leasing
scenario improving, the remaining portion of the DAL assets which is 6-7m
sq.ft will also get leased out over a period of time. This will lead to DLF
having a strong portfolio of rental assets.

Debt position

DLF’s gross debt stands at Rs216bn as of March 2010, which translated to DER
of 0.7. The debt has increased from Rs171.6bn in Q3FY10 on account of the
DAL-Caraf merger with DLF as well as the company buying out 90% of SC
Asia’s stake. However, this stake was bought after the close of the financial
year and though the company had arranged for the debt prior to closure of
accounts, the deduction from the networth will be seen only in Q1FY11. The
company’s DER is, therefore, likely to increase to 0.78.

During the course of FY11, the company’s mandatory debt repayment

obligation stands at Rs26bn. The company, however, plans a debt repayment
of Rs40-50bn during the year, 50% of which will be funded by operational
cash flows and the remaining 50% through the sale of non-core assets.

Debt Position (Rs m)

Current Position 31st March 2010 Post Purchase of 90% of SC Asia's stake (30-June 2010)
Networth 307,720 277,720
Gross Debt 216,770 216,770
DER 0.70 0.78
Source: Company Data, PL Research

May 17, 2010 4

 DLF

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India
Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209

Rating Distribution of Research Coverage

70%
58.3%
60%
% of Total Coverage

50%

40%

30%
20.9%
18.0%
20%

10% 2.9%
0%
Buy Accumulate Reduce Sell

PL’s Recommendation Nomenclature

BUY : Over 15% Outperformance to Sensex over 12-months Accumulate : Outperformance to Sensex over 12-months

Reduce : Underperformance to Sensex over 12-months Sell : Over 15% underperformance to Sensex over 12-months

Trading Buy : Over 10% absolute upside in 1-month Trading Sell : Over 10% absolute decline in 1-month

Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly

This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. Ltd. Mumbai, India (PL) and is meant for use by the recipient
only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of
PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.

The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently
verified the accuracy or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accept any responsibility of
whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein.

Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go
down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice
should be sought from an independent expert/advisor.

Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act
as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to
publication.

We may from time to time solicit or perform investment banking or other services for any company mentioned in this document.

For Clients / Recipients in United States of America:

All materials are furnished courtesy of Direct Access Partners LLC ("DAP") and produced by Prabhudas Lilladher Pvt. Ltd. ("PLI"). This material is for
informational purposes only and provided to Qualified and Accredited Investors. You are under no obligation to DAP or PLI for the information
provided herein unless agreed to by all of the parties. Additionally, you are prohibited from using the information for any reason or purpose outside
its intended use. Any questions should be directed to Gerard Visci at DAP at 212.850.8888.

May 17, 2010 5