COMPANY OVERVIEW:
The DLF Group was founded in 1946 by Raghvendra Singh and KP Singh .The company developed some of the first residential colonies in Delhi such as Krishna Nagar in East Delhi, which was completed in 1949. Since then they have been responsible for the development of many of Delhi’s other well known urban colonies, including South Extension, Greater Kailash, Kailash Colony and Hauz Khas.
Following the passage of the Delhi Development Act in 1957, the state assumed control of real estate development activities in Delhi, which resulted in restrictions on private real estate colony development. The company therefore commenced acquiring land at relatively low cost outside the area controlled by the Delhi Development Authority, particularly in the district of Gurgaon in the adjacent state of Haryana.
This led to first landmark real estate development project – DLF Qutab Enclave, which has now evolved into DLF City. DLF City is spread over 3,000 acres in Gurgaon and is an integrated township, which includes residential, commercial and retail properties in a modern city infrastructure with schools, hospitals, hotels and shopping malls. It also boasts of the prestigious DLF Golf and Country Club with night golfing facilities.
STRATEGIC PARTNERS:
Project Execution: DLF has entered into a 50:50 JV with WSP. The JV will provide engineering and design services, environmental and infrastructure facilities as well as project management services.
Construction:
DLF has entered into a 50:50 JV with WSP. The JV will provide engineering and design services, environmental and infrastructure facilities as well as project management services.
Airport Modernization: DLF has chosen Germany's Fraport AG (Frankfurt Airport Services Worldwide), the owner and manager of Frankfurt Airport, as its partner for fresh forays into airport modernization. A special purpose vehicle, DLF Fraport SPV, has been set up specializing in development and management of airports in India.
Township Development: DLF has signed a MoU with property developer Nakheel LLC of the United Arab Emirates to build large townships in India, through a 50:50 joint venture company.
Hospitality: DLF's hospitality arm, DLF Hotels, has signed a LoI with Four Seasons Hotels and Resorts to operate a proposed luxury hotel at DLF Golf Links in DLF City, Gurgaon in Delhi's southern borders.
IT Infrastructure: DLF has partnered with IBM to outsource all its IT requirements to the global IT infrastructure giant. Under this partnership IBM will be responsible for the helpdesk services for all the DLF employees across India towards the IT infrastructure requirements.
Asset Management: DLF and Prudential Financial Inc. (PFI) of US have signed a joint venture to provide a broad array of mutual fund and investment products, including domestic and eventually international mutual funds to Indian retail and institutional clients. The JV has been formulated on a 61:39 shareholding pattern between PFI and DLF.
SECTORAL&COMPANY OUTLOOK:
Fall in real estate demand and resultant price decline: we expect the real estate demand to weaken further in the next few quarter, owing to the current economic slowdown and the cautious approach of the bank towards the sector. This is likely to create downward pressure on property prices. We assume 15-20% in prices over the next six month across all the segments.
Shortage of funds would hurt new launches: during Q2 2009, the company launched only 0.25 million square feet (msf) of new space, the least since Q1 2008. We believe that the drying up of sources of funds and high receivable (63% of sales) will intensify the shortage of funds, thereby delaying the existing projects and new launches.
AREA UNDER EXECUTION FOR THE QUARTER:
FIGURE: MILLION SQUARE FEET (msf)
DEVELOPMENT HANDED OVER:
FIGURE: MILLION SQUARE FEET (msf)
RISK:
Failure to secure financing for the project may result in fund shortage and could lead to execution delay.
A slowdown in residential demand due to high interest rates remains the biggest risk to the company`s growth prospects.
SHAREHOLDING PATTERN:
|
|
NO. OF SHARES |
% OF TOTAL |
PROMOTERS |
1502823120 |
|
88.26% |
|
INSTITUTION |
124231366 |
|
7.30% |
|
GENERAL PUBLIC |
75657427 |
|
4.44% |
|
GRAND TOTAL |
1702711913 |
|
100% |
|
FINANCIAL:
|
|
31/03/07 |
31/03/08 |
TOATAL INCOME |
1429.5 |
6058.48 |
EXPENDITURE |
-443.48 |
-2451.82 |
OPERATING INCOME |
986.02 |
3606.66 |
DEPRECIATION |
-9.44 |
-25.68 |
PBIT |
|
976.58 |
3580.98 |
INTEREST |
|
-356.25 |
-447.65 |
PBT |
|
620.33 |
3133.33 |
TAX |
|
-213.42 |
-543.05 |
PAT |
|
406.91 |
2590.28 |
YOY CHANGE IN TOTAL INCOME.OPERATING PROFIT & NET PROFIT:
Total income has grown by 323% in the past years.
Operating profit has registered the growth of 265% in the same period.
Net profit has grown by 537%.
QoQ COMAPRISON OF LAST 5 QUARTERS:
|
|
30/09/07 |
31/12/07 |
31/03/08 |
30/06/08 |
30/09/08 |
TOATAL INCOME |
1282.26 |
1812.59 |
1756.52 |
1493.86 |
1362.86 |
EXPENDITURE |
-467.79 |
-869.49 |
-863.62 |
-465.16 |
-374.91 |
OPERATING INCOME |
814.47 |
943.1 |
892.9 |
1028.7 |
987.95 |
DEPRECIATION |
-3.25 |
-3.43 |
-15.59 |
-28.5 |
-29 |
PBIT |
|
811.22 |
939.67 |
877.31 |
1000.2 |
958.95 |
INTEREST |
|
-58.36 |
-130.12 |
-180.85 |
-181.68 |
-187.26 |
PBT |
|
752.86 |
809.55 |
696.46 |
818.52 |
771.69 |
TAX |
|
13.67 |
-203.66 |
-57.91 |
-117.49 |
-132.67 |
PAT |
|
766.53 |
605.89 |
638.55 |
701.03 |
639.02 |
CHANGE IN TOTAL INCOME QoQ:
CHANGE IN OPERATING INCOME QoQ:
CHANGE IN NET PROFIT QoQ:
RATIO:
|
|
30/09/07 |
31/12/07 |
31/03/08 |
30/06/08 |
30/09/08 |
|
EPS |
4.50185 |
3.558407 |
3.75022 |
4.117167 |
3.752981 |
|
OPM |
63.51832 |
52.03052 |
50.83347 |
68.86187 |
72.49094 |
|
NPM |
59.77961 |
33.42675 |
36.35313 |
46.92742 |
46.88816 |
INTEREST COVERAGE |
13.90027 |
7.221565 |
4.851037 |
5.495604 |
5.100798 |
EPS is showing declining trend in the last five quarter.
OPM has declined earlier from 63% to 52% but later got recovered. Same trend was also witnessed in the NPM earlier shown a decline but later shown a recovery.
Interest coverage has shown consistent decline. It has declined from 13 to 5 in just five quarter. This is alarming.
OUTLOOK & VALUATION:
We are cautious for medium term on the counter. The counter could see downward rearting in the coming months. we expect EPS to decline further on account of pressure on margin and realization.
Trailing twelve month EPS of the company stands at Rs 19. At CMP the stock is trading at 10.5x. We expect the growth in medium term in earning at around 5%.PE/G ratio at this price stands somewhere around 2.1. The ratio is 1.So by this we value the stock at somewhere in range of Rs100-Rs110.
CONCLUSION:
We are of the view that investor should avoid the counter. The investor who are holding the stock should sell it on every rise.
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