DLF stock launch pipeline and rental growth offset soft Q1 performance

Investment View and Valuation

ICICI Direct Research retains its BUY rating on DLF Ltd. with a target price of Rs 810, compared with the current market price of Rs 663. The view follows a soft Q1FY27, as the broker expects a substantial residential launch pipeline and expanding annuity rentals to support future growth.

DLF is India’s largest publicly listed real estate company, with residential, commercial and retail operations. Its land bank has development potential of 188 million square feet, with more than 70% located in Gurugram and around 22 million square feet under execution. DLF also owns commercial assets directly and through DCCDL, in which it holds a 66.67% stake.

Sum-of-the-Parts Valuation

ICICI Direct values DLF using a sum-of-the-parts approach. Residential assets are valued on NAV by discounting post-tax operating cash flows at a 12.5% WACC. Commercial assets are valued using a 7.5% capitalisation rate on FY28 rental income, while the balance land bank is valued at market value. No premium is assigned to NAV.

Soft Q1FY27 Operating Performance

DLF’s Q1FY27 operating performance was weak because project launches were deferred. Pre-sales fell 94% year-on-year and 83% sequentially to Rs 657 crore. Collections declined 14% year-on-year and 27% sequentially to Rs 2,406 crore.

Consolidated revenue declined 53% year-on-year and 29% quarter-on-quarter to Rs 1,280 crore as project handovers were lower. Gross margin and EBITDA margin fell by 1,132 basis points and 1,090 basis points year-on-year to 44.2% and 11.7%, respectively. Consolidated EBITDA declined 59% year-on-year to Rs 150 crore.

However, higher other income and joint-venture income enabled consolidated net profit to increase 4% year-on-year to Rs 794 crore.

DCCDL Performance

DCCDL reported Q1FY27 revenue of Rs 1,917 crore, EBITDA of Rs 1,474 crore and adjusted PAT of Rs 717 crore. These represented year-on-year growth of 10%, 9% and 21%, respectively.

Residential Launch Pipeline and Pre-Sales Outlook

Management retained its FY27 pre-sales guidance of Rs 20,000 crore, broadly in line with FY26 pre-sales of Rs 20,143 crore, despite the slow first quarter. Collections are expected to grow 10-15% year-on-year from Rs 13,500 crore in FY26.

DLF plans to launch projects with estimated gross development value of up to Rs 20,000 crore during the first nine months of FY27E. The pipeline includes:

• Arbour Senior Living or Arbour 2 in Gurugram.
• Hamilton II in H2FY27.
• Westpark Phase II in Mumbai by Q3FY27.
• A Goa residential project, subject to resolution of the public interest litigation.
• Fresh inventory at Dahlias.

DLF has a Rs 1.14 lakh crore launch pipeline, of which more than Rs 60,000 crore remains unlaunched. The company is also pursuing strategic Gurugram land parcels, with advances on land expected to fructify over the next three to four quarters.

Dahlias Progress

DLF booked around Rs 542 crore at Dahlias in Q1FY27 and had sold about 64% of the inventory. The Dahlias experience centre is expected to be ready in Q3FY27E. Management expects pre-sales to improve in H2FY27E, while project construction is planned over three to four years.

The company reported a net cash surplus, including RERA cash, of Rs 15,200 crore, up Rs 1,045 crore quarter-on-quarter. Around Rs 11,305 crore was allocated to RERA accounts.

Rental Platform and Annuity Growth

The rental platform remains a central support to the investment thesis. DLF’s approximately 50 million square feet rental portfolio operates at 95% area occupancy and 97% value occupancy. FY26 exit rentals were Rs 7,400 crore, while management targets Rs 8,200 crore of exit rentals by FY28.

The target is supported by 10-11% growth in the existing portfolio and three new malls. Management’s medium-term rental aspiration is approximately Rs 10,000 crore from a portfolio of around 76 million square feet. NOI is expected to grow in the mid-teens, while PAT is expected to grow at a 20-25% CAGR over four to five years.

Retail occupancy is 97-98%. Construction and leasing progress continue across Downtown Gurugram, Downtown Chennai and Atrium Place.

ICICI Direct Financial Forecasts

Key Risks

• Regional concentration: DLF faces concentration risk following sharp property-price appreciation in its key markets.
• Execution risk: Delays or challenges around major project launches could affect the projected growth trajectory.
• Diversification risk: Expansion into newer markets creates risks related to execution and market acceptance.