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DLF jumps 3% as Morgan Stanley upgrades stock

The target price implies more than 20% upside in DLF from the current market price.|
Last Updated: Nov 25, 2019, 03.51 PM IST|Original: Nov 25, 2019, 10.29 AM IST
The global financial services firm also upgraded the target price to Rs 269 from Rs 201 earlier.
Shares of DLF advanced nearly 3 per cent in early trade on Monday after Morgan Stanley upgraded the stock to ‘Overweight’ from ‘Equal-weight’ earlier.

The global financial services firm also upgraded the target price to Rs 269 from Rs 201 earlier. The target price implies more than 20 per cent upside in DLF from the current market price.

Morgan Stanley said DLF has restructured its business model and balance sheet to become a more focused development and rental company. From here, the spotlight will shift towards monetisation of its Rs 10,000 crore in unsold completed inventory, leading to positive free cash flow generation (around Rs 500-600 crore per annum) and, potentially, further deleveraging.

DLF’s sales bookings rose 16 per cent to Rs 1,425 crore during the first six months of this financial year, mainly due to demand for its ready-to-move-in residential units. DLF, the country's largest real estate firm in market capitalisation, had achieved sales bookings of Rs 1,225 crore in the same period a year ago.

The company earlier this month posted a 19 per cent rise in consolidated net profit at Rs 445.85 crore for the quarter ended September 30, mainly on lower expenses. The company’s net profit stood at Rs 374.74 crore in the year-ago period.

“The rental business (DCCDL) has gained scale, with prospects of low-mid-teens growth from the current high base (Rs 3200 crore in F20e rentals). The company is starting a new asset creation cycle for both its development and rental businesses. All this, along with reasonable valuation (40 per cent discount to our March 2021 NAV estimate) drive our rating upgrade to Overweight,” Morgan Stanley said in a report.

The shares of the company closed 1.69 per cent higher at Rs 220.20 on BSE.

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