Real estate developer DLF Ltd expects to see double digit growth in its residential sales in FY13. This was important information in its analyst meet held on 27 May. The new launch of 7.6 million sq ft (MSF) in the current fiscal will boost sales bookings. On pre-sales of DLF in FY22 7,273 crore on a y-o-y basis, more than doubled, reaching a multi-year high. With this, the company exceeded its sales guidance. 6,000-6,500 crore.
Analysts say that while DLF has not shared a solid pre-sales guidance for FY13, double-digit growth of over 10% on FY12 basis is downright positive. In response to management’s remarks, DLF stock ended Monday’s trading session up 7% on the NSE.
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Still, the stock is up 23% from its 52-week high 449.70 views in October 2021. DLF’s selling outlook is strong, but there are risks of price hike due to rising home loan interest rates and inflation. Therefore, a significant uptrend in the stock would be gradual, analysts said.
The DLF management feels that if the interest rates on home loans go up by more than 8%, there will be a significant impact on sales. In case of real estate developers, a lending rate of more than 10% will have a significant impact on the return profile, the management said. Manufacturing costs were up 10-15% annually, but since DLF’s product mix is high-margin, the 5% portfolio price increase should be enough to offset the impact, management said. The DLF management has said that it will continue to focus on the luxury and middle-income segment, which enjoy higher margins than the affordable housing sector.
“These risks are not exclusively for DLF only, but the re-rating of the stock largely depends on the development of the land bank. DLF enjoys the advantage of having a major share of the land bank in the major National Capital Region. However, if these risks pan out, they could affect the projected sales trajectory, which is a bearish one for the stock,” said an analyst at a domestic brokerage house requesting anonymity.
Considering DLF’s ability to drive price hikes in the ONE Midtown, Delhi project, analysts at Motilal Oswal Financial Services have increased their pre-sales estimates for FY 2013/24 by 6-9%. “While the near-term growth outlook remains intact across all sectors, the uncertainty of the interest rate cycle going forward will lead to limited land revaluation,” the domestic brokerage house said in a report on May 29.