Shares of real estate major DLF Ltd gained nearly 3 per cent on Tuesday to Rs 641, but despite the recovery the stock is down 26 per cent in from its 52-week high at 869.15. The total market capitalization of the company stood above Rs 1.57 lakh crore but the brokerage firms continue to remain positive on it, expecting up to 40% upside in the stock.

Brokerage firms have highlighted DLF's strong operating performance, while also pointing to concerns over the pace and geography of future residential growth. Elara Capital said DLF's core delivery remained strong across residential cash flows, annuity execution and luxury housing sales, even as the stock has fallen in the past year and underperformed the Nifty Realty Index.

SBI Securities underlined DLF's diversified business model, with presence across development and annuity businesses. It said the development business delivers high margins and strong cash flows, while the rental business provides a steadily growing income stream.

According to Elara Capital, DLF's core residential operating cash flow stood at Rs 7,800 crore, up 23 per cent year-on-year (YoY), with a CAGR of 31 per cent during FY22-FY26. Exit rentals rose to Rs 7,400 crore at a CAGR of 15 per cent over the same period. It also highlighted continued traction in the uber-luxury segment, with The Dahlias contributing 65 per cent of FY25 pre-sales and 24 per cent of FY26 pre-sales.

Elara, however, said market caution appears linked to DLF's continued dependence on Gurugram in the residential business. It said the company's rolling three-year market share in Gurugram fell to 16 per cent from 20 per cent in FY23 as listed players added projects worth about Rs 1.6 lakh crore in NCR during FY24-FY26, contributing to a 5 per cent YoY decline in FY26 pre-sales.

It also flagged limited visibility on using development business net cash of Rs 14,100 crore to expand the residential pipeline beyond Gurugram, while noting that Mumbai offers a sizeable margin-accretive opportunity despite DLF being present in only one micro-market.

SBI Securities said DLF has an operational annuity portfolio of about 50 million sq ft with 95 per cent occupancy, including 45 million sq ft of office space at 95 per cent occupancy and 5 million sq ft of retail space at 97 per cent occupancy. It said that DLF has a pipeline of about 27 million sq ft under planning and development.

SBI said DLF's FY26 exit rental run-rate was Rs 7,400 crore, with guidance of about Rs 8,200 crore by FY27 and a medium-term aspiration of Rs 10,000 crore. It also noted record FY26 collections of Rs 13,517 crore, up 15 per cent YoY, pre-sales of Rs 20,143 crore in line with guidance, and surplus cash generation of Rs 7,746 crore.

On strategy, SBI Securities said management has maintained FY27 pre-sales guidance of about Rs 20,000 crore and will prioritise margin accretion, free cash flow and launch discipline rather than chase volumes. Planned launches include a large DLF City project with estimated sales potential of Rs 8,000-9,000 crore,

SBI listed key risks as project concentration in NCR, delays in execution and real estate cyclicality, while Elara said DLF's REIT-ready annuity portfolio, occupancy above 95 per cent, 27 million sq ft pipeline and net debt to GAV of 19 per cent offer downside protection. SBI Securities has a target price of Rs 720 with a 'buy' tag, Elara retained a 'buy' on it , but cut target price to Rs 900.

Among other brokerage firms, JM Financial and Motilal Oswal Financial Services have a 'buy' rating on DLF with a target price of Rs 775. ICICIDirect also gave it a 'buy' with a target price of Rs 810.