DLF shares set for up to 60% upside despite recent correction, Elara remains 'constructive'

Shares of real estate major DLF Ltd are set for a 60% upside from the previous close, according to brokerage Elara Capital. However, the brokerage has pared its target price to Rs 900 against the earlier Rs 1050. In the current session, DLF shares were trading on a flat note at Rs 573.30  Market cap of the firm stood at Rs 1.41 lakh crore. 

The stock has fallen 34% in a year and fallen 17% in 2026. 

Elara Capital continues to remain constructive on DLF despite recent underperformance, citing the company's strong balance sheet, premium rental portfolio, and attractive valuation. The stock lags the Nifty Realty Index by nearly 8 percentage points, even as the company has delivered solid operational performance.

The brokerage believes the market's cautious stance stems largely from concerns over DLF's dependence on the Gurugram residential market, where growth has begun to moderate. The company's market share in the region has slipped to about 16 percent on a rolling three-year basis from nearly 20 percent in FY23, amid aggressive project launches by listed real estate developers across the National Capital Region (NCR). New project additions worth approximately Rs 1.6 lakh crore during FY24-FY26 have intensified competition and contributed to a 5 percent year-on-year decline in DLF's FY26 presales.

 Another key concern for investors is the limited visibility on how DLF plans to deploy its sizeable cash reserves to accelerate growth outside Gurugram. The company's development business currently holds net cash of around Rs 14,100 crore, but investors are awaiting clearer signs of expansion into new residential markets.

Elara highlights Mumbai as a significant long-term growth opportunity. The city offers a much larger share of premium housing demand, with absorption in projects priced above Rs 40,000 per square foot estimated to be nearly four times that of Gurugram. DLF's current presence in Mumbai remains restricted to a single micro-market, leaving substantial room for expansion.

Despite lowering the target price to Rs 900, Elara reiterated its 'Buy' recommendation on the stock. The revised valuation is based on a sum-of-the-parts (SOTP) approach and reflects a higher weighted average cost of capital (WACC) of 13.5 percent, compared with 12.75 percent previously. The valuation also incorporates a lower embedded EV/EBITDA multiple of 13 times, versus 17.5 times earlier, while assuming FY28 presales and EBITDA margins of 45 percent.

At current market levels, DLF is trading at an estimated 40 percent discount to its March 2027 net asset value (NAV), suggesting the market is assigning minimal value to its extensive residential land bank beyond the medium-term launch pipeline. Analysts estimate that the rental business contributes roughly 24 percent of the target NAV, while the development business accounts for the remaining 76 percent.

Within the development portfolio, land reserves outside the launch pipeline represent nearly 70 percent of gross asset value, while ongoing and upcoming residential projects contribute around 23 percent. Rental assets make up the remaining 7 percent.

Elara continues to favour DLF for its defensive characteristics and strong annuity income platform. The company operates nearly 50 million square feet of rental assets with average occupancy levels exceeding 95 percent and has an additional 27 million square feet under development, providing long-term earnings visibility. Its low net debt-to-gross asset value ratio of around 19 percent further strengthens the investment case.

While risks such as project launch delays and regulatory hurdles remain, analysts believe DLF's superior margins, healthy cash flows, high-quality rental portfolio, and strong balance sheet position the company well for long-term value creation.