Project pipeline, rentals keep DLF on Street radar

Synopsis

DLF's stock surged by 9.4% in a month, driven by strong sales and new launches, particularly in the luxury segment. The company plans to expand its residential and rental businesses, reduce debt, and distribute 50% of net profit as dividends. Analysts predict a 32-51% stock price upside, indicating robust growth potential.

ET Intelligence Group: The stock of real estate major DLF has gained 9.4% in a month, partially offsetting a 23% decline during the previous three months. In an analyst meeting on March 21, the North India-focussed company provided a detailed roadmap of future strategy backed by improving sales, an extensive land bank, and planned capital investments. It has chalked out plans to expand residential and annuity businesses while focusing on maintaining a cash-positive balance sheet and reducing debt.

Driven by new launches, DLF reported ₹19,187 crore in sales bookings for the first nine months of FY25, exceeding its full-year guidance of ₹17,000 crore.

"Project launches, particularly in the super-luxury segment, received exceptional market response, exceeding expectations," stated Motilal Oswal Financial Services in a report. The brokerage expects pre-sales to grow by 20% annually to ₹25,000 crore in FY27 from ₹14,800 crore in FY24.

Agencies

DLF has 37 million square feet (msf) of new launches in the pipeline with sales potential of ₹1,14,500 crore. Of this, 35% has been launched and another 15% is planned for FY26. The pipeline is largely focused on luxury and super-luxury segments, where DLF has strong brand positioning.

The company's rental income business, managed under DLF Cyber City Developers (DCCDL), is set to double in the coming years. "The planned capex of ₹20,000 crore will expand the portfolio size to 73 msf with exit rentals of ₹10,000 crore expected by FY30, a two-fold growth from the current levels," stated JM Financial Institutional Securities in a report. Rental revenue rose by 10.7% on year to ₹3,793 crore in the nine months to December 2024.

Over the last five years, the realtor has reduced net debt to ₹14,679 crore from ₹24,028 crore. By FY30, it aims to achieve zero net debt at the group level. The company estimates a surplus cash potential in the medium term to reach ₹50,000 crore. DLF has already achieved a net cash-positive status, with the development business set to reach zero gross debt position soon. Furthermore, it intends to distribute 50% of its net profit as dividends, enhancing shareholder value.

Analysts have a buy call on DLF's stock given its strong earnings potential. The target price ranges between ₹915 and ₹1,050, indicating a 32-51% upside from the current level. With a robust launch pipeline, growing rental income, and a focus on debt reduction, the company looks well placed for sustainable growth.

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