3QFY2013 Result Update | Real Estate

February 19, 2013

DLF
Performance Highlights
Y/E March (` cr) Net sales EBITDA OPM margin (%) PAT 3QFY13 1,310 87 6.6 285 2QFY13 2,040 746 36.6 139 % chg (qoq) (35.8) (88.3) (2,995)bp 105.6 3QFY12 2,034 823 40.4 237 % chg (yoy) (35.6) (89.4) (3,380)bp 20.2

ACCUMULATE
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

`270 `288
12 months

Real Estate 45,864 21,350 1.5 279/170 832,701 2 19,636 5,940 DLF.BO DLFU@IN

Source: Company, Angel Research

For 3QFY2013, DLF reported a disappointing set of numbers, both on the revenue and profitability front. On the top-line front, its revenue declined by 35.6% yoy to `1,310cr which was below consensus estimate of `2,040cr. EBIDTAM came in at 6.6% for the quarter which was significantly lower than the street estimate of 36.6%. This was mainly on back of (a) nil revenue booking from its recently launched project Skycourt, (b) provision for loss on non-core assets and (c) cost adjustment on account of inflationary pressure not provided for in earlier quarters. However, owing to surge in other income, mainly due to asset sale, the company reported a PAT of `285cr for the quarter, indicating a growth of 20.2% yoy. We recommend an Accumulate rating on the stock. Operating performance remains weak: Sales booking was recorded at 2.27mn sqft, up from 1.59mn sqft in the sequential previous quarter, mainly due to new launches, ie 1.24mn sqft in Gurgaon, 0.57mn sqft in Chandigarh and 1.1mn sqft in Bangalore during the quarter. On the leasing front, the company leased out an area of 0.69mn sqft in 3QFY2013, registering a growth of 35.3% qoq. Outlook and Valuation: The company has been able to reduce its net debt level owing to monetization of its non-core assets. Going forward, on the back of new launches, we expect sales volume of 10.2mn sqft and 11.7mn sqft for FY2013 and FY2014 respectively. In the short term, we continue to remain positive on the companys near-term plans of debt reduction. Further with the high value of new project launches and monetization of non-core assets, we expect improvement in cash flow going forward. We recommend an Accumulate rating on the stock with a target price of `288.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 78.6 0.5 16.0 5.0

Abs. (%) Sensex DLF

3m 6.3 28.6

1yr 6.6 3.6

3yr 20.4 (9.7)

Key Financials (Consolidated)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 9,561 28.8 1,541 (14.5) 39.3 9.7 28.0 1.9 3.8 6.0 6.5 16.6

FY2012 9,629 0.7 1,178 (23.5) 40.5 7.1 38.2 1.8 3.0 6.4 6.5 16.1

FY2013E 7,953 (17.4) 808 (31.4) 34.6 4.4 61.8 1.8 (0.7) 3.9 6.6 14.8

FY2014E 9,699 22.0 1,013 25.3 37.0 6.0 45.2 1.7 2.0 5.8 5.4 11.8

Viral Shah
022-39357800 Ext: 6842 viralk.shah@angelbroking.com

Please refer to important disclosures at the end of this report

DLF | 3QFY2013 Result Update

Exhibit 1: Quarterly performance (Consolidated)

Y/E March (` cr) Net Sales Operating profit OPM (%) Interest expenses Depreciation Other Income PBT Provision for Taxation Tax rate (%) PAT before Extra-ordinary item Exceptional Minority/Profit in associates PAT after Extra-ordinary item & MI PAT Margin EPS (`)
Source: Company, Angel Research

3QFY13 1,310 87 6.6 581 248 981 240 (8) 3.5 248 0 37 285 21.7 1.7

2QFY13 2,040 746 36.6 522 184 117 158 39 (25.0) 118 0 20 139 6.8 0.8

% chg (qoq) (35.8) (88.3) (2,995)bp 11.2 34.9 736.4 52.0 (121.3) (114.0) 109.8

3QFY12 2,034 823 40.4 620 180 362 385 135 (35.2) 249 0 (13)

% chg (yoy) (35.6) (89.4) (3,380)bp (6.3) 37.9 171.3 (37.8) (106.2) (0.6)

9MFY2013 5,547 1,900 34.3 1,726 610 1,230 794 145 (18.2) 649 0 67

9MFY2012 % chg (yoy) 7,013 3,107 44.3 1,643 525 464 1,403 411 (29.3) 992 0 (3) 989 14.1 5.8 (27.6) (120)bp (27.6) (34.5) (20.9) (38.8) (1,004)bp 5.1 16.2 165.1 (43.4) (64.8)

105.6 1,495bp 105.6

237 11.6 1.4

20.2 1,009bp 20.2

716 12.9 4.2

Exhibit 2: DLF: Actual vs Consensus Estimates- 3QFY2013

(` cr) Net Sales Operating Profit OPM (%) Reported PAT
Source: Company, Angel Research

Actual 1,310 87 6.6 284.8

Estimates 2,274 947 41.6 435.0

Var (%) (42.4) (90.8) (3,500)bp (34.5)

February 19, 2013

DLF | 3QFY2013 Result Update

New launches to drive sales

Sales booking was recorded at 2.27mn sqft, up from 1.59mn sqft in the sequential previous quarter, mainly due to new launches, ie 1.24mn sqft in Gurgaon, 0.57mn sqft in Chandigarh and 1.1mmn sqft in Bangalore during the quarter. On the leasing front, the company leased out an area of 0.69mn sqft in 3QFY2013, indicating a growth of 35.3% qoq.

Exhibit 3: Development Company sales (Mn Sqft)

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 2.25 1.28 1.34 1.59 3.30 2.27 6.75

Exhibit 4: Leasing sales (Mn Sqft)

1.2 1.0 0.8 0.6 0.42 0.4 0.2 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 0.97 0.96 0.69 0.51

0.66

0.64

Source: Company, Angel Research

Source: Company, Angel Research

One-time items hurt profitability

On the top-line front, DLFs revenue declined by 35.6% yoy to `1,310cr in 3QFY2013; which was below consensus estimate of `2,040cr. EBIDTAM came in at 6.6% in 3QFY2013 which was significantly below street estimate of 36.6%. This was mainly due to (a) nil revenue booking from its recently launched project Skycourt, (b) provision for loss on non-core assets and (c) cost adjustment on account of inflationary pressure, not provided for in earlier quarters. However, owing to surge in other income mainly due to asset sale, the company reported a PAT of `285cr for the quarter, indicating a growth of 20.2% yoy.

Exhibit 5: Revenue trend

3,000 2,500 2,000 1,500 1,000 2,446 2,532 2,034 2,617 2,198 2,040 1,310 500 0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 Revenue (` cr) (LHS) yoy change (RHS) 20.6 6.9 (18.0) (2.5) (10.1) (19.5) (35.6) 30.0 20.0 10.0 0.0 (10.0) (20.0) (30.0) (40.0)

Exhibit 6: Lower EBIDTAM hurts profitability

1,400 1,200 1,000 800 600 1,111 1,173 1,067 400 200 0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 EBITDA (` cr) (LHS) EBITDA margin (RHS) 6.6 746 87 30.5 45.4 46.3 40.4 48.6 36.6 60.0 50.0 40.0 30.0 20.0 10.0 0.0

823

Source: Company, Angel Research

Source: Company, Angel Research

February 19, 2013

798

DLF | 3QFY2013 Result Update

Debt reduction continues to remain the key

During the quarter, the company has reduced its debt levels by `1,870cr to `21,350cr owing to sale of NTC mill getting reflected in 3QFY2013. This has helped the company to reduce its debt-to-equity ratio to 0.84x from 0.92x in 2QFY2013. As per the Management, the recent sale of Aman resorts and wind power business would help the company bring down its debt to `19,000cr by 4QFY2013. We believe this would help the company improves its profitability going forward.

Exhibit 7: Debt reduction through asset monetisation

23500 23000 22500 22000 21500 22700 22927 22758 22725 22680 23220 21000 20500 20000 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 Net debt (` cr) Debt-to- equity 0.84 21350 0.9 0.9 0.92 0.9 0.91 0.92 0.94 0.92 0.9 0.88 0.86 0.84 0.82 0.8

Exhibit 8: Area under execution

60.0 50.0 40.0 30.0 20.0 10.0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 39.4 39.7 35.0 40.6 40.6 47.6 54.0

Source: Company, Angel Research

Source: Company, Angel Research

Investment argument
Outlook looks positive going ahead
DLF is planning to bring down its debt to `11,000cr over the next three years through improvement in cash flow, monetization of assets and equity infusion. As per the Management, the company expects normalized EBITDA of `8,250cr per annum from FY2016 onwards owing to (a) new rental assets, (b) renegotiations in existing rental assets and (v) launches of high value residential projects. Further, to boost its rental asset sales, the company is adding significant value in the ecosystem by providing enhanced connectivity, safety & security initiatives and sustainability efforts.

Outlook and valuation

The company has been able to reduce its net debt level owing to monetization of its non-core assets. Going forward, on the back of new launches, we expect sales volume of 10.2mn sqft and 11.7mn sqft for FY2013 and FY2014 respectively. In the short term, we continue to remain positive on the companys near-term plans of debt reduction. Further with the high value of new project launches and monetization of non-core assets, we expect improvement in cash flow going forward. We recommend an Accumulate rating on the stock with a target price of `288.

February 19, 2013

DLF | 3QFY2013 Result Update

Company Background
DLF is India's largest real estate developer with over 60 years of experience in the industry. The company is mainly involved in the development of residential, commercial and retail properties. DLF has a unique business model with earnings arising from development and rentals. The company has also forayed into infrastructure, SEZ and hotel businesses. The company has 338msf of planned projects with 48msf of projects under construction.

February 19, 2013

DLF | 3QFY2013 Result Update

Profit & Loss Statement (Consolidated)

Y/E March (` cr) Gross sales Less: Excise duty Net Sales Other operating income Total operating income % chg Total Expenditure Cost of construction Other Construction Personnel EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of asso. Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2009 FY2010E FY2011 FY2012 FY2013E FY2014E 10,035 (0) 10,035 10,035 (30.5) 4,445 3,229 762 454 5,590 (42.5) 55.7 239 5,351 (44.4) 53.3 555 396 7.6 5,192 (45.7) 5,192 675 13.0 4,517 21.1 27.5 (1.4) 4,470 4,517 (42.8) 44.5 26.3 26.3 (43.8) 7,423 (0) 7,423 7,423 (26.0) 3,911 2,580 865 467 3,512 (37.2) 47.3 325 3,187 (40.4) 42.9 1,110 428 17.1 2,505 (51.8) 2,505 702 28.0 1,802 (0.8) (10.8) 94.2 1,720 1,802 (61.5) 23.2 10.1 10.1 (61.5) 9,561 0 9,561 9,561 28.8 5,808 4,300 936 572 3,753 6.9 39.3 631 3,122 (2.0) 32.7 1,706 584 29.2 2,000 (20.1) 2,000 459 23.0 1,541 (8.8) 7.2 (97.2) 1,640 1,541 (4.7) 17.1 9.7 9.7 (4.7) 9,629 0 9,629 9,629 0.7 5,725 3,967 1,171 586 3,904 4.0 40.5 689 3,215 3.0 33.4 2,246 594 38.0 1,563 (21.8) (16.0) 1,547 369 23.9 1,178 (33.6) 1.5 9.5 1,201 1,178 (26.8) 12.5 7.1 7.1 (26.8) 7,953 (0) 7,953 7,953 (17.4) 5,197 3,368 1,272 557 2,756 (29.4) 34.6 856 1,899 (40.9) 23.9 2,227 1,352 132.0 1,024 (34.5) 1,024 225 22.0 799 0.9 62.0 3.9 742 808 (38.2) 9.3 4.4 4.4 (38.2) 9,699 0 9,699 9,699 22.0 6,114 3,903 1,552 660 3,585 30.1 37.0 891 2,694 41.9 27.8 2,037 676 50.7 1,333 30.1 1,333 320 24.0 1,013 1,013 1,013 36.6 10.4 6.0 6.0 36.6

February 19, 2013

DLF | 3QFY2013 Result Update

Balance Sheet (Consolidated)

`

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities & Provisions Net Current Assets Mis. Exp. not written off Total Assets

FY2009 FY2010E FY2011 FY2012 FY2013E FY2014E 339 1,396 22,418 22,758 634 16,320 (41) 41,066 8,487 574 7,912 5,688 2,265 1,402 31,622 1,196 9,712 20,715 7,824 23,798 41,066 339 5,920 339 1,810 339 1,810 339 1,810 25,828 26,167 421 19,444 (335) 47,508 21,613 3,437 18,176 9,088 1,625 1,127 28,538 1,588 5,523 21,428 11,045 17,493 47,508 339 1,810 26,841 27,181 421 16,235 (335) 45,311 22,001 4,328 17,673 9,720 1,625 1,127 28,099 1,427 5,388 21,284 12,932 15,167 45,311

24,173 24,182 25,086 24,513 24,522 25,426 628 251 575 (163) 421 (335) 21,677 24,094 22,545 52,989 50,838 49,866 17,884 19,828 21,295 1,326 1,956 2,581 8,993 1,625 1,127 1,506 5,174 16,558 17,872 18,714 11,129 10,234 1,268 5,505 928 7,593 8,777 1,384 996 1,322 4,166

27,306 30,168 32,596

18,784 24,680 25,916 9,816 13,188 18,529 20,352 19,408 52,989 50,838 49,866

February 19, 2013

DLF | 3QFY2013 Result Update

Cash Flow Statement (Consolidated)

Y/E March Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc)./Dec. in Fixed Assets (Inc.)/Dec in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2009 FY2010E 5,192 231 (5,429) (396) (675) (1,077) (492) 396 305 3,804 (372) 317 4,054 (947) 2,142 1,195 2,505 752 5,002 (428) (702) 7,129 (4,103) 428 0 5,357 (417) 6,177 11,117 (267) 1,195 928 FY2011 2,000 629 (1,430) (584) (459) 156 (1,049) 4,509 584 4,044 2,418 (797) (5,428) (3,807) 394 928 1,322 FY2012 FY2013E FY2014E 1,547 625 1,128 (594) (369) 2,337 (226) (131) 594 238 (1,549) (841) (2,391) 184 1,322 1,506 1,024 856 1,997 (1,352) (225) 2,300 (413) 1,352 939 (3,100) (57) (3,158) 81 1,506 1,587 1,333 891 2,165 (676) (320) 3,393 (1,020) 676 (344) (3,210) 0 (3,210) (160) 1,587 1,427

(3,828) (14,838)

(3,925) (18,513)

February 19, 2013

DLF | 3QFY2013 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Working cap cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage 0.7 2.7 9.6 0.8 5.9 2.9 0.9 6.1 1.8 0.8 5.4 1.4 0.7 6.5 0.9 0.5 4.1 1.3 1.5 371 75 154 723 0.6 576 93 216 988 0.5 525 61 263 699 0.5 592 63 408 700 0.4 675 76 522 776 0.4 503 62 423 558 14.6 19.5 21.8 6.8 8.9 7.6 6.0 8.1 6.3 6.4 8.5 4.7 3.9 5.2 3.1 5.8 8.0 3.8 53.3 87.0 0.3 13.3 3.4 0.6 19.2 42.9 72.0 0.2 5.0 4.2 0.8 5.6 32.7 77.0 0.2 4.7 5.7 0.9 3.8 33.4 76.1 0.2 5.0 7.3 0.9 3.0 23.9 78.0 0.2 3.1 8.3 0.8 (0.7) 27.8 76.0 0.2 4.6 8.7 0.6 2.0 26.3 26.3 28.0 2.2 134.1 10.1 10.1 12.5 2.5 144.4 9.7 9.7 12.8 4.7 144.5 7.1 7.1 11.0 149.8 4.4 4.4 9.8 154.2 6.0 6.0 11.2 160.1 10.3 9.6 2.0 0.8 5.5 9.8 1.3 26.6 21.5 1.9 0.9 8.1 17.2 1.1 28.0 21.1 1.9 1.7 6.5 16.6 1.2 38.2 24.5 1.8 6.5 16.1 1.2 61.8 27.5 1.8 6.6 14.8 1.2 45.2 24.1 1.7 5.4 11.8 1.2 FY2009 FY2010E FY2011 FY2012 FY2013E FY2014E

February 19, 2013

DLF | 3QFY2013 Result Update

Research Team Tel: 022 - 4040 3800 DISCLAIMER

E-mail: research@angeltrade.com

Website: www.angeltrade.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

DLF No No No No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) :

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

February 19, 2013

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