Investors with short-term view and high-risk appetite should apply for DLF issue

By Asit C Mehta The analysts at Asit C Mehta recommended investors with short-term investment horizon and high-risk appetite to subscribe for the DLF issue. Incorporated in the year 1946, DLF is promoted by K P Singh. Development of residential, commercial and retail properties constitute its primary business. The company is largest real estate development company in India in terms of the area of completed residential and commercial properties. DLF has land reserves in various regions across India admeasuring 10,255 acres with an estimated developable area of 574 million sq. ft. The company is also diversifying into more potential sectors related to real estate like infrastructure, SEZs and hotel businesses. DLF has huge land reserves spread across various regions of India, admeasuring 10,255 acres, of which 51% stake is from NCR (which includes Delhi and adjacent areas like Gurgoan) and 23% from Kolkata. The company is acquiring land for many years. The rate at which it acquired has increased in last three years. The analysts at Asit C Mehta say that if the company develops 30 acres of saleable land every year with current land reserves, then they are sufficient for the planned development of the company for next 10 years. DLF`s revenues increased at CAGR of 25.73% from Rs 6,610 million in FY04 to Rs 39,672 million in FY07. Whereas net profit has grown at CAGR of 24.80% from Rs 460 million in FY04 to Rs 19,413 million in FY07. Its operating margin and net profit margin for FY07 were 57.18% and 74.23%, respectively. The profit for FY07 has seen a huge jump, due to sale of the commercial property (Rs 22,071 million) to DLF Assets, which is a promoter group company. At the lower band P/E is 43.90x and at the upper band P/E is 48.29x for EPS of Rs. 11.39 (post equity) for FY07 as compared with construction industry P/E of 57.5 (average), the analysts recommend to `SUBSCRIBE` to the issue.