We initiate coverage on DLF Ltd. with a NEUTRAL rating and a price target of Rs770 and continue to look for suitable entry points into the stock.
The landbank, acquired at a low historical cost, should support EBITDA margins of 65-67% for the next few years even as revenues grow at an 85% CAGR over FY07-10E.
A company owned by the promoters of DLF – will be a likely near-term trigger for DLF as it will give more evidence of cap rate compression for IT-SEZ properties driving a 5% increment to our NAV of Rs645/share. While the stock trades at 18% premium to our forward NAV, we believe that a gradual shift to a PE based valuation methodology, as seen in China, will be beneficial for DLF. In a blue sky scenario, the stock could trade up to 20xFY09CL earnings i.e. Rs1,000/share. Maintain BUY.
Joined: 11/Aug/2006
Location: India
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Posted: 02/Oct/2007 at 1:30pm
DLF to develop New Bangalore; The Karnataka government today awarded the 9,187-acre Bidadi Knowledge City (today the 2nd October 2007),Project to entail investment of Rs 60,000 Cr
Source: As understood by me
Edited by PKB2000 - 02/Oct/2007 at 1:31pm
I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
Joined: 29/Oct/2006
Location: India
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Posts: 205
Posted: 02/Oct/2007 at 11:38pm
NEW DELHI: Fuelled by the impressive economic growth, the country's real estate market which is growing at 30 per cent, is likely to touch $90 billion by 2015, a recent report projects.
Though the growth of the realty sector came down in recent times, it would touch $90 billion from the current level of $14 billion and would help the economy continue to grow between 9-10 per cent, according to a recent report by industry body, Assocham.
"While $10 billion FDI is expected to flow to the sector by 2008, it might reach $15 billion by 2010," Assocham President Venugopal N Dhoot said in a statement.
The additional requirement of 370 million sq ft of space in urban areas by 2010 by IT, ITeS, financial services and organised retail alone has still made the real estate most lucrative sector, providing returns ranging from 20 to 30 per cent, the report said.
Repealing the Urban Land (Ceiling and Regulation) Act 1976, rescind of the Rent Control Act and increasing floor-area-ratio would give further boost to the sector, Dhoot added.
According to the chamber report, IT and ITeS, banking and financial services have in particular created a huge demand for office space.
IT and ITeS alone is expected to require 150 million sq ft across urban India by 2010, while services are further expected to clock a double-digit growth in the future, keeping the demand of office space robust.
As per the report, analysts pegged the total demand for commercial office real estate in Bangalore, Chennai, Delhi-NCR, Mumbai, Pune, Hyderabad and Kolkata alone to be over 25 million sq ft in 2006.
MUMBAI: Reserve Bank may tighten its grip on the country's real estate sector further in its forthcoming mid-term review of the monetary policy on October 30, Ernst and Young has said.
"With real estate prices continuing to appreciate, we foresee that the (RBI's) policy baton may tighten in near future as well," E&Y said in a study on the country's real estate sector.
This will leave real estate developers with little option but to resort to more expensive financing options, it said.
Already concerned about the growing exposure of sceduled commercial banks (SCBs), the apex bank has clamped down on foreign debt into the real estate sector, hiking risk weight for home loans and increasing provisioning requirements of banks.
These measures had some dampening impact on the housing demand, though overall absorbtion remained healthy. These also helped to keep specualtors away from the market, it said.
Exposure of the SCBs to real estate sector grew by alomst 80 per cent in 2006 over the previous year, E&Y said, adding that the sector constitutes 91 per cent of their lendings to sensitive sectors.
"With limited bank credit and restriction on infusion of foreign debt into the sector, going forward, financing real estate projects may become more challenging especially for developers with limited development experience and management background," E&Y said.
This will lead to more pressure on the profit margin of the real estate developers, who are already bearing the brunt of rising input and overhead costs.
"The cost for key input material such as steel and cement has been growing in the last couple of years. It is estimated that the cost of cement has increased by 30 per cent and that of steel by 10 per cent, translating into a 15-20 per cent hike in overall cost of construction," E&Y said.
The impact of such a rise has not been witnessed extensively as the same has been set off by rapidly rising capital values for real estate, it added.
E&Y also believes that with increasing global integration, the Indian real estate sector is no more isolated from possible tremors in the global economy.
It exposes the sector to global risks, including rising global oil prices and the downturn in the US economy.
In such cases, any such adverse movement could be a dampener to real estate sector's growth momentum.
RBI will certainly consider these risks while drafting the mid-term policy to "cool off" the country's real estate sector, it said
2) Do not expect to soften rate - almost all analysts
3) "Why did not you decrease the rate of interest on home loan by 100 basis point- seems you are conservative" by our Finance Minister as said by Dipak Parekh ( HDFC bank)
4) RBI believes that we are not insulated from global factors fully - during the peak of Subprime issue
5) Citi bank calls Educomp as big theft in SENSEX and also they gave a sell call on REL when it was 1000- many people believe that they have given for consolidating their positions
Lots of argument and probabilities. the curse of life is the fear of unknown uncertain future- DEMON and GHOSTS. But we must live with us in our present and that is real.
I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
Joined: 11/Aug/2006
Location: India
Online Status: Offline
Posts: 1453
Posted: 03/Oct/2007 at 2:35pm
Originally posted by PKB2000
Originally posted by smartcat
Those bullish on DLF would read this article as - 'The fair value of DLF is Rs. 1,000 then'. Those bearish on DLF would read this article as - 'DLF management are a bunch of crooks, always planning to loot poor investors'.
I belong to the former camp. The management offering lower number of shares than originally planned is a good sign.
Who is the 'rival camp'?
Mitti se bani yeh Kahani, Miitti ka kya mol lagaoge Smartcat Ji! Yhe PRICELESS!
Surely it will cross 1000 but not today. Its an investment stock indeed!
I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
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