Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DLF Ltd (BOM:532868, Financial) reported strong presales numbers of INR6,400 crores, driven by the successful launch of Privana West.
- The company achieved a PAT of INR646 crores, reflecting solid financial performance.
- DLF Ltd (BOM:532868) generated over INR2,500 crores of free operating cash flow during the quarter, indicating robust cash flow management.
- The rental business, including offices and malls, continues to show strong performance, supported by significant CapEx investments.
- The company has a healthy pipeline of new launches, including projects in Goa, Mumbai, and additional phases of the Privana family, indicating future growth potential.
Negative Points
- Margins were notably weak when excluding other income, raising concerns about underlying profitability.
- Construction costs are expected to rise significantly in the coming quarters, potentially impacting future margins.
- There is some noise in the market about slower sales in higher ticket size categories, although DLF Ltd (BOM:532868) has not experienced this slowdown.
- The company faces challenges in the SEZ leasing market, with current vacancy rates around 8%, and efforts to reduce this to 6-7% by year-end.
- There are ongoing governmental charges and approval processes for new projects, which could delay launches and increase costs.
Q & A Highlights
Highlights of DLF Ltd (BOM:532868) Q1 FY25 Earnings Call
Q: Can you explain the margin side, excluding the other income, which was higher? What products have gone into that margin recognition?
A: The reported margins are based on positions issued for products sold two to five years back. As the proportion of Camellia's possessions reduces, you may see some softening. However, new product launches continue to have embedded margins in the late 30s, and we aim to return to mid-40s margins later this year. Other income includes interest earnings from fixed deposits and an income tax refund interest component of INR80-90 crores.
Q: Can you talk about the construction cost side? Should we assume it will trend low or go up from current levels?
A: Construction costs will go up. High-rise launches like Arbour, Privana South, and Privana West are in various stages of construction. By Q3, construction outflow on the depot side should be north of INR800 crores.
Q: Are you seeing any slowdown in the INR7 crore-plus category in Gurgaon?
A: We haven't seen a slowdown. Demand is consolidating towards better products. Our bookings are serious, with an INR50 lakh booking amount. Collections have been at an all-time high, indicating strong endorsement of the DLF brand.
Q: What are the new projects added to the launch guidance?
A: No new projects this quarter. The increase in guidance is driven by more realistic price expectations for Lux 5. The pricing expectations for Privana, Mumbai, and Goa remain the same.
Q: What are the completion timelines for DT Gurgaon Block 4 and DT Chennai Block 3?
A: Downtown 4 Gurgaon should complete by February-March next year, and Downtown 3 Chennai by the end of this year. Rental incomes for both projects are expected to start flowing in from May next year.
Q: What is the launch timeline for the Mumbai project and other upcoming launches?
A: Goa launch is expected before September end, Lux 5 in the next quarter, and Mumbai by December or January. Q4 should see another Privana launch and small launches in Chandigarh and commercial projects.
Q: What is the driver of the jump in rentals this quarter, and what is the exit run rate?
A: The jump in rentals is due to annual accruals and the start of rentals in Downtown 1 and 2 in Chennai. The exit run rate for this year is INR5,000 crores, with a significant increase expected next year due to additional Downtown projects.
Q: Can you provide guidance on the DLF Mall and Atrium Place projects?
A: Atrium Place's first three blocks will get OCs between January and April next year, with rentals starting at INR240-250 crores next year and reaching INR580-600 crores when fully completed. The three malls will total up to INR300 crores in rentals when completed.
Q: What is the status of the IREO piece and its launch timeline?
A: The 20-acre group housing license transfer is ongoing and should complete soon. The 7-acre plotted license is being converted. We expect to launch early next year, with some governmental charges due.
Q: Does the land acquisition payment of INR413 crores relate to the same module sale or another land parcel?
A: It does not. About INR230 crores are TDR payments for Privana, and the balance is for partner payments and smaller land acquisitions. The total cost of TDR is about INR1,800-1,900 per square foot.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
