Kotak Institutional Equities has reaffirmed its BUY rating for DLF Limited (NSE: DLF) with a 12-month target price of Rs1,020, representing a 23.5% upside from the current market price of Rs826. The bullish outlook stems from DLF's record-breaking FY2025 pre-sales of Rs212 billion (+44% YoY), a robust Rs739 billion residential launch pipeline, and accelerated expansion of its annuity portfolio. With margins stabilizing at 40-45% and a net cash position of Rs68.5 billion in development operations, Kotak highlights DLF's unique position as a market leader leveraging India's urban real estate resurgence. The stock trades at an attractive 8.8X EV/EBITDA versus 15X for pure-play REITs.

Residential Dominance: The Dahlias Drives Record Pre-Sales

DLF's residential arm delivered Rs212 billion in pre-sales during FY2025, smashing guidance through strategic launches like The Dahlias (Rs137 billion contribution). Key metrics show:

Management emphasizes margin protection over volume chase, maintaining blended portfolio margins of 40-45% through premium launches like Privana North (Rs100 bn project) and Mumbai/Goa expansions[1].

Launch Juggernaut: Rs739 Billion Pipeline to Sustain Momentum

DLF's development runway includes:

• FY2026 Launch Target: Rs170 bn across Privana North (Rs100 bn), Mumbai (Rs20-25 bn), and Goa (Rs25 bn)
• Land Bank Leverage: 143 mn sq ft residential + 62 mn sq ft commercial landbank in Gurugram
• Margin Security: 29.5 mn sq ft of launched but unsold inventory worth Rs367 bn residual gross margins

Annuity Ascent: Rentals to Double by FY2030

The commercial portfolio shines with:

• Current Rentals: Rs51 bn (DLF + DCCDL), targeting Rs100 bn by FY2030
• Occupancy Rate: 94% across 43.1 mn sq ft operational portfolio
• Pre-Leased Pipeline: 6.2 mn sq ft in Gurugram/Chennai with 99% pre-commitments

Valuation Case: Discount to Peers Presents Opportunity

At Rs826, DLF trades at:

• 8.8X EV/EBITDA (FY2025E) vs 15X for REITs
• 4.8X P/B vs sector average of 6.2X
• 0.7x P/NAV despite Rs1,020 SoTP valuation

Kotak's sum-of-parts valuation includes:

• Residential Development: Rs836/share (82% weight)
• Annuity Portfolio: Rs185/share (18% weight)

Risk Factors: Macro Headwinds Could Temporarily Dent Sentiment

Key monitorables include:

• Interest rate volatility impacting housing demand
• Execution delays in Rs739 bn launch pipeline
• Commercial real estate oversupply in Tier-1 cities

DLF's net cash position (Rs106.6 bn including RERA balances) and 94% annuity occupancy provide downside cushion against macro shocks[1].

Final Verdict: Prime Play on India's Urbanization Megatrend

With Kotak's analysis confirming DLF's unique position to capitalize on both cyclical residential demand and structural rental growth, the Rs1,020 target appears achievable. Investors gaining exposure below Rs900 enter at 12%+ margin of safety to fair value. The stock remains a core portfolio holding for investors seeking leveraged plays on India's real estate renaissance.