DLF, India’s largest real estate developer, posted weak numbers for the quarter ended September, in line with analysts’ expectations.
Consolidated net profit declined 77.2% year on year to Rs 439.74 crore as revenues dropped 53.2% to Rs 1,750.94 crore and interest expenses increased more than five fold to Rs 248.61 crore.
Revenues include sale of around 2 million square feet (msf) on account of bookings from Delhi Capital Greens and Bangalore projects. On a sequential basis, revenues increased 6%. Even as average price realisation increased 36% over the June quarter, poor demand in the commercial segment led to a marginal decline (about 1.5%) in overall average price realisation. The commercial and retail segment still appears weak, though analysts expect it to revive in 6-9 months.
Poor revenue growth and higher staff cost and other expenditure impacted operating performance, with operating profit margins declining 702 basis points to 52.18%. However, operating margins increased nearly 700% on a sequential basis due to higher contribution from the luxury or premium segment housing.
Around Rs 850 crore of DLF’s debt is expected to mature in FY2010. A cash balance of about Rs 1,110 crore puts the company in a comfortable situation to meet its debt obligations.
Going forward, DLF intends to reduce its net debt to Rs 6,000-7,000 crore from more than Rs 14,000 crore as on March 2009 through operating cash flows from current and new launches, balance payments from debtors and asset sales. The company plans to launch about 10-12 msf of properties across key locations in the second half of the year, backed by robust demand in the housing segment.
Most analysts are negative on the stock.
“We rate the stock Sell with a RNAV-based, 12-month price target of Rs 375. Upside risks include a sustained pick-up in property transaction volumes,” Vishnu Gopal and Aditya Soman of Goldman Sachs wrote in a note to clients post results on October 30. RNAV stands for revalued net asset value.
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