D.R. horton rides the housing boom

Abstract

This work project "Equity Research -Valuation of D.R. Horton's (DHI)" depicts DHI's business within the US homebuilding industry. Given a current 5.3 million shortage of homes in the US market (driven by the emergence of the Millennials demographic group in the housing market and the rapid growth of US "Sun Belt" region where DHI has a strong position), we expect homebuilding revenues to have an average annual growth rate of 8% until 2030. However, an uncertain mortgage rates environment and the possibility of additional inflationary pressure of house prices can pose some risks to DHI. Our DCF valuation yields a price target of $139.30 for FY22, resulting in a 31% total shareholder return, considering a $0.9 dividend and hence, a BUY recommendation.