Markets
DLF’s spot cemented by robust launch pipeline, premium demand
Summary
- Gurugram, the mainstay market of DLF, is seeing an upswing in real estate demand. Will that be enough to boost stock market returns for the company?
The country’s largest listed real estate developer DLF Ltd is on course to reap the benefits of a strong launch pipeline, unabated demand for premium projects and vast land reserves. However, elevated valuations may limit the gains for investors.
DLF ended FY24 with healthy sales bookings of ₹14,780 crore, a tad lower than FY23 as it did not launch any major projects in the fourth quarter.
The company has already made a solid start to FY25 by selling all 795 apartments in its latest luxury housing project in Gurugram – DLF Privana West – for a staggering ₹5,590 crore, and that too within three days of launch earlier this month.
It has given a sales booking guidance of ₹17,000 crore for FY25, but analysts are more gung-ho expecting DLF to surpass this target. Further, the company plans to launch projects having a gross development value of ₹36,000 crore in FY25.
Upcoming launches this financial year include luxury projects in Gurugram (DLF 5 and Privana’s new phase), Chennai, Goa and the first phase (1 million square feet) of its project in Mumbai – marking DLF’s re-entry into India’s largest real estate market.
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The dynamics of DLF’s mainstay market of Gurugram remain in its favour. The Gurugram real estate market is experiencing an upswing, backed by strong demand from high-net worth individuals (including non-resident Indians, or NRIs) and a relative scarcity of high-quality inventory. Around 85% of DLF’s projects are in its home market of Delhi-NCR.
Meanwhile, its commercial properties arm DLF Cyber City Developers Ltd saw rental income rise 9% on-year to ₹4,300 crore. The management expects the figure to reach ₹6,000 crore by FY25-end.
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Rental income for two towers at DLF Downtown, Chennai will ramp up from the first quarter of FY25 and for the pre-leased Standard Chartered tower from the first quarter of FY26. Similarly, tower 4 at DLF Downtown, Gurugram will also contribute to rentals from the same quarter.
Stock outlook amid robust market dynamics
“We continue to remain positive on DLF given the strong momentum in Gurugram with inventory overhang of six months, strong launch pipeline in FY25, strong liquidity position with cash surplus visibility of ₹8,250 crore and huge monetizable land bank (at historical costs) in a housing upcycle — an important competitive advantage," Antique Stock Broking said.
However, some analysts reckon the upside in the stock has already been priced in. The DLF stock has vaulted 75% over the past year, though it still trails the Nifty Realty index’s 107% leap.
“Our assumption of a 12-13-year monetization timeline for its (DLF’s) remaining 160 mn sq. ft of land bank…adequately incorporates this growth," said a report by Motilal Oswal Financial Services. It is estimating an 8-10% compounded annual growth in prices across its key markets of Gurugram, New Gurugram, Delhi, and Chandigarh.
“Based on the above assumptions, we value the land at ₹1,10,900 crore. The current valuation already implies ₹1,16,200 crore of value for its land, indicating limited upside potential," it added.
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