>DLF (CENTRUM)

Pain continues, maintain Sell

■ Results below estimates: Q4 revenues plunged 74% YoY to Rs11.2bn and PAT declined 92.6% to Rs1.6bn owing to fall in DAL sales and one-time revenue write-down of Rs6.8bn owing to price resets in ongoing projects.

■ Lack of visibility on DAL’s leasing activity: DLF delivered 5.1mn sq ft of space to DAL vs. its stated target of 9mn sq ft by 31 March 2009. DLF plans to deliver ~3.5mn sq ft of space in H1FY10 with a further 5mn sq ft of space to be leased over FY10-12.

■ DAL receivables still at Rs49bn, no immediate recourse in sight: With net inflow of Rs5.4bn from DAL in Q4, DAL receivables stand at Rs49bn. With no clarity on PE fund infusion and DAL-DLF merger, committee of independent directors has been appointed to explore various options.

■ Debt obligations for FY10 met, but FY11 remains a concern: DLF has met its repayment obligations of Rs35bn for FY09-10 through debt repayment of Rs7.2bn and obtaining fresh longterm loan of Rs25bn. However, Rs25bn of debt maturing in FY11 is a concern.

■ Land bank reduces to 425mn sq ft resulting in land payments reducing significantly: Land bank reduces by 327mn sq ft on account of pullout from Bidadi and Dankuni projects (269mn sq ft) and re-sizing of other township and hotel projects (58mn sq ft). As a result, outstanding land payments reduce from Rs57bn to 2.5bn.

■ Maintain Sell, revise target price to Rs143: Our target price of Rs143per share is at 25% discount to NAV and has increased by Rs23 per share from Rs120 previously after factoring in the net impact of reduced outstanding land payments from Rs57.1bn to Rs2.5bn and reduction in land bank.

To see full report: DLF