Home / Markets / Mark To Market /  Why DLF stock needs new triggers now

Relatively high exposure to the luxury residential segment has worked in favour of DLF Ltd in recent quarters. Sales momentum has largely sustained for DLF so far, despite the ongoing interest rate hikes and, consequently, rising home loan rates. But sales here are driven mostly by non-resident Indians (NRIs) and high net-worth individuals, who have shown resilience to rate hikes.

But here’s a catch. DLF has largely exhausted its launch pipeline in the luxury segment and would bank upon the success of ONE Midtown in Delhi to launch high-rise luxury projects in key markets, pointed out Motilal Oswal Financial Services Ltd. “Starting H2FY23, DLF’s launch pipeline of 12.5 million square feet (msf) for the next 18 months is expected to be skewed towards high-rise projects having the saleable potential of 6.5 msf worth 16,000 crore," said the broking firm in a report on 6 December.

Staying resilient
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Staying resilient

DLF has significant operations in the National Capital Region (NCR). In Q3FY23, it would launch another phase at Panchkula in Haryana and a high-rise in Gurugram, the management said in the latest earnings conference call. Collections are expected to improve from H2FY23 as projects with shorter cycles are nearing completion. NRIs’ contribution to sales for the company is currently around 12-14% and has the potential to double with the company’s consistent efforts, the management added.

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In CY22, the stock has risen by 4.62%. The returns may appear modest, but in the backdrop of sombre investors’ sentiment towards the real estate sector, it has beaten the Nifty Realty Index’s 5.4% correction. The company enjoys some advantages, such as pricing discipline in its crucial market of NCR and availability of land parcels which eliminate the risk of a prolonged land acquisition process. However, these positives are largely factored in. That said, for meaningful upsides hereon, the stock awaits newer triggers. “The company is on track to achieve its FY23 pre-sales guidance. In fact, if the company revises it further upward, then it would be a sentiment boost," said Parikshit Kandpal, vice president of institutional research, HDFC Securities Ltd. DLF has guided for pre-sales (bookings) target of around 8,000 crore and is about halfway through that in H1FY23.

Also, since DLF gets a large part of its revenue from the NCR region, it is expanding into new markets, and fructification of that is crucial, he added. Meanwhile, on the commercial side, vacancies for DLF’s assets have bottomed out, and improvement in occupancies is required for better visibility on rentals.

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