>DLF LIMITED (CITI)

Alert: First Take on DLF 1QFY10E

■ Results ahead of estimates – Though revenues of Rs17.46bn and earnings of Rs3.96bn were down 55% YoY and 79% YoY respectively; this was better than our estimated 70% and 90% fall. QoQ growth was however healthy. EBITDA margins of 45% surprised, despite the fall in revenues; would await more details on this. The company has also announced dividend of Rs2/share for FY09.

■ Operationally, signs of improvement – 1) Construction activity has picked up, now 42msf under contrs (vs. 36.5msf in 4Q), particularly resi projects; also delivered 1msf of off/comm. space, 2) pre-sold ~2.5msf in the qtr – Delhi, Capital Greens (2msf); and Bangalore (0.5msf); 3) total developable area down to 423msf (vs. 425msf earlier due to sale of few projects/land, 4) de-notified 5-SEZs as commercial/IT space demand still muted – though pick-up in enquiries.

■ DAL Update – DAL outstanding recd to the tune of Rs25bn in the qtr (vs. target Rs20bn), this has lowered receivable to Rs26bn (vs. Rs49bn as of Mar’09), expects another Rs5bn during FY10.

■ Focus on liquidity and de-leveraging – 1) Reduced debt by Rs20bn, gearing down to 0.5x in Jun’09 (vs. 0.6x in Mar’09) – targeting to reduce this to 0.3x by Mar’10; 2) Sold non-core assets worth Rs5bn in 1Q, expects another Rs50 by end FY10.

■ Prima facie thoughts – Better than expected qtr though sustaining these margins going forward appear difficult. Operationally, improved construction activity and reducing DAL receivables and debt are positive signs. The mgmt is scheduled to have a conf call today at 16:00hrs (IST) – will come back with more details post the call.

To see full report: DLF LTD