2QFY11 results review. DLF's 2Q revenue of `23.7bn crossed our estimate but net profit, at `4.18bn, was 8% below our estimates mainly owing to rise in construction costs on ongoing older projects. Gross debt marginally reduced; net D/E stood at 0.88x.
Sales low, Leasing improves. Although two projects were soft launched in 2Q, sales stood at 2.08m sqft. Inventory from the prime Gurgaon stock now stands evaporated. Leasing was in line with our estimates of 1.5m sqft, showcasing DLF's brand equity and office-space momentum picking up. However, with 15m sqft under construction and over-supply in the commercial market, we believe that rental appreciation and cap rate compression is unlikely in the near term.
Debt still high. Although marginally down, the `230bn gross debt is a concern. Continuing asset sales (`7.07bn in 1HFY11) and utilisation of operation cash-flow (given most CCPs for FY10 have been redeemed) are key. New plot launches provide high cash visibility. Debtors, although up in 2Q, are likely to reduce, given increase in execution and commencement of construction in almost all launched projects.
Sales low, Leasing improves. Although two projects were soft launched in 2Q, sales stood at 2.08m sqft. Inventory from the prime Gurgaon stock now stands evaporated. Leasing was in line with our estimates of 1.5m sqft, showcasing DLF's brand equity and office-space momentum picking up. However, with 15m sqft under construction and over-supply in the commercial market, we believe that rental appreciation and cap rate compression is unlikely in the near term.
Debt still high. Although marginally down, the `230bn gross debt is a concern. Continuing asset sales (`7.07bn in 1HFY11) and utilisation of operation cash-flow (given most CCPs for FY10 have been redeemed) are key. New plot launches provide high cash visibility. Debtors, although up in 2Q, are likely to reduce, given increase in execution and commencement of construction in almost all launched projects.
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