Buy DLF for 49% upside says Elara Capital
Posted: Tue Mar 25, 2025 8:59 pm
The key takeaway from the DLF (DLF IN) analyst day is management focus on playing to its strengths – luxury & super-luxury product offerings and monetizing the existing landbank of 196mn sqft (development business) offering +20 years of earnings visibility. Presales guidance is conservative, flat YoY, for FY26, given robust underlying demand at the home turf where the next phase of Privana launch is set to be frontended (likely in Q1FY26), leaving room for another phase launch by Q4FY26. Also, the Mumbai launch is set for Q1FY26 vs Q4FY25, presales in FY26 driving our FY25E presales down by 8%. The development business is set to generate INR 500bn in surplus cash in the medium term, driving DLF’s near-term goal of gross debt zero. The annuity business outlook is upbeat with in-line portfolio scale-up (size to reach 73mn sqft in the next 4-5 years vs 44mn sqft) while preleasing and rentals of under-construction assets are trending higher than expected. This will aid in an annual rental target of INR 100bn by FY30 vs exit rental of ~INR 53bn in FY25. Overall, ~2x growth in group PAT and cashflow is in sight by FY30 along with transitioning to a dividend payout policy of 50%. The stock is trading at a ~25% discount to March 2026E NAV - an expansion strategy in Mumbai and Noida entry (residential business) are key catalysts to address this pricing anomaly, in our view. Reiterate Buy.
The stock is trading at a 25% discount to March 2026E NAV. We reiterate Buy with a SOTP-based March 2026E TP of INR 1,050, valuing devCo at ~1.2x NAV. DevCo accounts for 73% of our March 2026E NAV while rentCo accounts for 27%. DevCo’s land reserves account for 66% of DevCo’s GAV, with a mediumterm launch pipeline at 27% (including launched inventory & receivables), and rental assets at 6% (please refer to Residential upcycle far from fatigue on 24 February 2025).
The stock is trading at a 25% discount to March 2026E NAV. We reiterate Buy with a SOTP-based March 2026E TP of INR 1,050, valuing devCo at ~1.2x NAV. DevCo accounts for 73% of our March 2026E NAV while rentCo accounts for 27%. DevCo’s land reserves account for 66% of DevCo’s GAV, with a mediumterm launch pipeline at 27% (including launched inventory & receivables), and rental assets at 6% (please refer to Residential upcycle far from fatigue on 24 February 2025).