Walking the talk
The key takeaway from the DLF (DLF IN) analyst day is management focus on playing to its strengths – luxury & super-luxury product offerings and monetizing the existing landbank of 196mn sqft (development business) offering +20 years of earnings visibility. Presales guidance is conservative, flat YoY, for FY26, given robust underlying demand at the home turf where the next phase of Privana launch is set to be frontended (likely in Q1FY26), leaving room for another phase launch by Q4FY26. Also, the Mumbai launch is set for Q1FY26 vs Q4FY25, presales in FY26 driving our FY25E presales down by 8%. The development business is set to generate INR 500bn in surplus cash in the medium term, driving DLF’s near-term goal of gross debt zero. The annuity business outlook is upbeat with in-line portfolio scale-up (size to reach 73mn sqft in the next 4-5 years vs 44mn sqft) while preleasing and rentals of under-construction assets are trending higher than expected. This will aid in an annual rental target of INR 100bn by FY30 vs exit rental of ~INR 53bn in FY25. Overall, ~2x growth in group PAT and cashflow is in sight by FY30 along with transitioning to a dividend payout policy of 50%. The stock is trading at a ~25% discount to March 2026E NAV – an expansion strategy in Mumbai and Noida entry (residential business) are key catalysts to address this pricing anomaly, in our view. Reiterate Buy.
Development business outlook remains solid with launch pipeline of >INR 1tn, ~200mn sqft of land reserves: The residential pipeline is anchored by 4.5mn sqft of uber luxury product – the Dahlias with a revenue potential of ~INR 350bn (INR 118bn booked as on Q3FY25). Key launches in FY26 include Mumbai, Goa and new phases of Privana accounting for ~15%+ of the launch pipeline. Notably prior launches of Privana are retrading at ~20-30% higher vs. launch price, underscoring strong appetite for a DLF product. Target gross margin (GM) stands at +45% – GM of unsold launched inventory at >50% vs 34% for unrecognized revenue on sales booked. Overall, this pipeline is set to generate INR 500bn in surplus cash.
Annuity portfolio ramping-up better than expected; looks to grow hospitality segment: The annuity portfolio rental goal for FY30 is at INR 100bn vs exit rentals (office + retail) of INR 53bn in FY25. This is led by strong preleasing and higher in-place rents reaching INR 175 per sqft per month for under-construction assets at Gurugram offering a significant mark-to-market potential for operational assets (in-place rents at ~INR 120 per sqft per month). The office and retail pipeline is set to reach 73mn sqft in the medium term vs 44mn sqft with 8.3mn sqft near completion. Planned capex in the medium term is set at INR 200bn, including capex of INR 10bn on hospitality.
Reiterate Buy with a TP of INR 1,050: The stock is trading at a 25% discount to March 2026E NAV. We reiterate Buy with a SOTP-based March 2026E TP of INR 1,050, valuing devCo at ~1.2x NAV. DevCo accounts for 73% of our March 2026E NAV while rentCo accounts for 27%. DevCo’s land reserves account for 66% of DevCo’s GAV, with a mediumterm launch pipeline at 27% (including launched inventory & receivables), and rental assets at 6% (please refer to Residential upcycle far from fatigue on 24 February 2025).
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