DLF Gets 'Neutral' Rating As Nomura Initiates Coverage

Nomura has initiated coverage on DLF Ltd. with a 'neutral' rating, citing that the long-term growth prospects are already priced into the current valuations. The brokerage has set a target price of Rs 700 for the stock.

Nomura appreciates DLF's strong pre-sales expectations for financial year 2026 and financial year 2027, driven by a robust pipeline valued at over Rs 96,000 crore. The firm also highlights the anticipated 12% compound annual growth rate in annuity income from rental assets in DLF Cyber City Developers Ltd. and DLF Development Company. It also expects 15% CAGR in operating cash flow before interest and tax over FY25 to FY27, supported by strong collection momentum.

Despite these positive factors, Nomura's neutral rating reflects that current valuations already account for DLF's long-term growth potential. The target price of Rs 700 is based on a sum-of-the-parts valuation, considering DLF's medium-term pipeline, unutilised land bank, and rental assets.

Nomura expects DLF's pre-sales to reach over Rs 20,000 crore in FY26, a 16% year-on-year increase. The company's recent high-rise projects, including The Arbour, Privana South, Privana West, and The Dahlias, have seen strong demand, with significant contributions from non-resident Indians, who make up nearly 30% of DLF's sales.

Looking ahead, Nomura anticipates annuity income growth as 6.6 million square feet of rental assets to come online, including retail plazas, DLF Downtown in Gurugram and Chennai, and Atrium Place. The firm also expects a strong capex cycle in DCCDL, with new assets totaling 11 million square feet.

While Nomura acknowledges the potential for stronger-than-expected launches or price appreciation, it also notes the downside risks of a slowdown in the NCR market or reduced NRI demand.