DLF shares slip 3% post results, here’s why brokerage firms remain bullish despite mounting losses

DLF said Covid-19 impacted operations for most part of the June quarter and was not comparable with the previous quarters.

Real Estate developer DLF’s share price tumbled 1.6% on Friday morning, taking the stock down 3% since the company reported its April-June quarter results. DLF reported a net loss of Rs 72 crore in the quarter against Rs 412 crore of net profit that DLF reported in the same period last year. As expected the coronavirus pandemic ate into the company’s revenues that slipped over 58% from a year ago period. However, despite this brokerage firms are still bullish on the stock, on the back of DLF’s strong cash reserves and stronger market position.

Total income of DLF fell to Rs 647 crore in the first quarter of this fiscal year, down from Rs 1,541 crore in the same period last year. Net sales bookings in the development business was down to just Rs 150 while rental income slipped to Rs 650 crore infor DLF Cyber City Developers. The drop in rental income was on the back of rental waivers that DLF provided to commercial tenants. “In the malls business which contributes the balance rentals, DLF has given complete waiver of rentals of Rs 120 crore in the first quarter and expects to collect close to Rs 250 crore of mall rentals in financial year 2021 overall as it offers more waivers in the remainder of this fiscal,” said brokerage and research firm ICICI Securities.

ICICI Securities has a BUY call on the stock with a target price of Rs 209 per share. “DLF is comfortably positioned with Rs 2,300 crore of cash reserves and low net D/E of 0.2x. At DCCDL level, the company continues to post collections of over 95% in offices while mall collections have seen a short-term impact on account of temporary closures,” ICICI Securities said. 

DLF’s management claimed that the company is well placed on the liquidity front. Its debt repayment, excluding DLF Cyber City Developers (DCCDL), over the next year is Rs 1,840 crore, while it has a cash balance of Rs 2,300 crore. On an average, DLF has provided full waiver during the first quarter and around 50% waiver during the second quarter, along with some waivers in the third and fourth quarters of this fiscal as well. “DLF is renewing focus on mid-income housing and cost savings to tide over the crisis. We maintain earnings estimates for the erstwhile merged entity despite DCCDL’s demerger,” said Edelweiss Securities. The brokerage firm has a target price of Rs 202 per share on the scrip.

DLF has Rs 8,900 crore worth unsold inventory and Rs 2,300 crore in receivable from sales already made and pending cash flows of Rs 1,000 crore. “New launches in the development business will likely act as a catalyst for stock performance, even as performance on annuity business remains on track,” said Kotak Securities in a note while pinning a fair value of Rs 200 on the stock.