DLF’s Q1FY12 revenue at Rs24.5bn grew 20.5% YoY and was above our estimate of Rs23bn. PAT at Rs3.58bn was 7% below our estimate. However, margins at 45.4% was 320 bps ahead of our estimates. Higher interest cost (Rs4.95bn in Q1FY12 vs Rs4.5bn in Q4FY11) and lower than estimated other income lowered PAT. Operational cash flow, though improved sequentially to Rs8.4bn, may fall further if DLF fails to execute non core asset sale. Key strategy of the company would be to (i)Accelerate cash flows through plotted sales (sold ~2.2 msf in Q1FY12 of which 1.1msf is plot sales; total sale of 1.9 msf in Q4FY11). Company has a target of ~10-12 msf plot sale for FY12 (ii)Strengthen cash flow by debt reduction (net D/E decreased marginally to 0.85x v 0.86x in previous quarters) through sale of non-core assets sale(sold approx Rs1.65bn in Q1FY12 v/s Rs2.94bn in Q1FY11). We believe that any delay in execution of the above strategy is likely to hamper its cash flow and may keep stock under pressure in the near term. We maintain BUY with a target price of Rs315.

Revenue increased by 21% YoY: Revenue in Q1FY12 increased 21%YoY and fell 9%QoQ to Rs24.5bn. The company has done sales booking of 2.2msf in Q1FY12 as against 1.9 msf in Q4FY11. Sales booking is in line with our expectation and in line with the company’s strategy to do plot sale of approx 10-12 msf in FY12 sale. Plot sale is likely to be one of the key factors both for revenue recognition and cash generation for the company in FY12.

EBIDTA margin improves but PAT almost flat sequentially. The EBITDA margin bounced back to 45.4% (PINCe of 42%) in Q1FY12 as against 25% in Q4FY11 (onetime cost reset due to input price inflation of Rs4.75bn). We believe that going forward the margins are likely to stay in the range of 42-47% on account of better margins from rentals and no major surprises on the cost overrun due to rising raw material prices which was noticed in Q4FY11. Despite margin improvement PAT in Q1FY12 was almost flat at Rs3.6bn as against Rs3.5bn in Q4FY11 due to rise in interest cost by 8.9% QoQ to Rs4.96bn and fall in other income.

VALUATIONS AND RECOMMENDATION We retain ‘BUY’ with a target price of Rs315 and hold the view that debt reduction and accelerated cash flows through plot sale, noncore assets sale is likely to move the stock from the current level.