Oberoi Realty Ltd. share price target

With a muted residential pre-sales backdrop, ORL is utilizing surplus cash flows to build robust lease asset portfolio. Work has started on Oberoi Borivali/Worli mall and Worli Office/Commerz III. Whilst in initial stages of construction and leasing, the rental potential of the ORL portfolio is expected to increase from Rs 3.3bn to Rs 15-18bn over next 3yrs. This shall then become REIT able and unlock value for shareholders. Residential projects sales velocity has been muted except for Borivali project, which is seeing strong demand due to lack of large gated project in the micro market. Mulund is seeing strong over supply with stressed projects being taken over by credible real estate players like L&T/Prestige Estate. ORL is building out affordable luxury product in Thane which shall augur well for volumes recovery/pre-sales velocity. We maintain NEU. Key risks (1) Approvals delays; (2) Continuation of weak underlying demand and (3) Delays in pre-lease tie up of under construction lease portfolio. ORL reported Revenue miss of 5% while EBITDA/PAT beat came in at 3.7%/4.1%. Pre-sales remain sluggish despite new inventory being opened up. Lease assets are shaping up on ground, we incorporate Borivali mall in our valuation. We maintain NEU with SOTP-based TP of Rs 573/sh (vs. Rs 539/sh earlier). We have reduced our FY20/FY21E EPS estimates by 50.6%/18.6%.

11 February2020 Despite the lack of new launches, OBER exhibited good pre-sales momentum, led by sustained sales at existing projects across the micro markets in MMR. On the commercial side, strong leasing at Commerz II and construction progress of ongoing projects provide comfort. We cut our pre-sales estimate for FY20/21 to factor in the delay in Thane and Exquisite III project launches. However, we broadly maintain estimates for the leasing and hospitality segments. volumes were up 5% YoY (+11% QoQ) at 0.16msf in 3QFY20, largely driven by strong bookings in Exquisite, Prisma and Maxima. Booking value grew 26% YoY to INR3,033m. Notably, sales traction remained healthy in existing projects across the micro markets in MMR. Launch of Thane project and Exquisite III in 1HFY21 bode well from the volume perspective. Leasing revenue was largely driven by ramp-up in Commerz II, where occupancy increased YoY from 64% to 100%.

Oberoi Realty revenue decreased by 17% YoY/18 percent QoQ to Rs. 4.9 Bn. Residential segment experienced a significant slowdown in pre-sales volume to 1.4 lakh sft.

ORL witnessed a disappointing quarter with regards to presales with the Mulund projects continuing to be a pain point. However, the company expects the sales to improve in the Worli project during 2HFY20 with the company applying for an OC certificate which is expected to be received by 4QFY20/1QFY21. We believe ORL may have to offer discount schemes for its Mulund projects depending on the response in the coming quarters. Subvention scheme is here to stay as the banks continue to selectively provide this facility for projects with credible developers. ORL will continue to incur large capex over the next 2-3 years with simultaneous under-construction activity for its annuity portfolio with Worli mix development, Commerz-III, Worli and Borivali Malls all expected to become operational around FY21-23 which will put further pressure on the stock price and limit de-rating. We maintain NEU. ORL reported Rev/EBIDTA/APAT miss of 22/22/32%. We maintain NEU with a reduced SOTP-based TP of Rs 510/sh (vs Rs 525/sh earlier). We have not made any changes to our FY20/FY21E estimates.

Overall weak market dynamics dampen sales volumes Sales volumes de-grew 41.6% YoY (de-grew 41.9% QoQ) to 1.4 lakh sq ft (lsf), impacted by weak demand and overall slowdown in the economy. Only silver lining was higher sales at Three Sixty West project where ORL sold four units (36,127 sq ft) with sales value of | 150.2 crore. Overall, due to delay in new launches and weak demand in the sector, we lower ORL's sales...

22 October 2019 42%/43% YoY to 0.14msf/INR3.2b. Overall collections grew 23% YoY to INR6.9b. Revenue declined 17% YoY to INR4.9b (v/s est. EBITDA margins contracted 665bp to 43.3% (v/s est. Sales volume/value declined 28%/39% YoY to 0.38msf/INR7.

Subvention schemes continue across ORL's projects (NHB's directive does not affect banks) which, along with ORL's strong brand recall, will aid inventory monetization of 4.6mn sqft (~4x FY20E sales). Timely launches in Thane/ Goregaon and pre-sales momentum improvement post receipt of OC in Worli will certainly aid pre-sales growth in FY20E, outside Borivali. Off late, the industry has been plagued with an increasing credit crunch (both for buyers and developers) and the reduction of FSI charges (for a 2 year window) from 50% to 40% is a positive development in such a scenario. ORL will continue to incur large capex to complete its annuity portfolio which will put pressure on the stock price and limit further re-rating. We maintain NEU on ORL. We maintain NEU with a reduced SOTP of Rs 517/sh (vs Rs 525/sh earlier). We have cut FY20/21E EPS by 3.9/3.5% to account for increased interest expense. Real estate headwinds mar re-rating.

Sales volumes grow 65.3% QoQ to 2.4 lsf in Q1FY20 ORL's sales volumes grew 65.3% QoQ (de-grew 16.3% YoY) to 2.4 lakh sq ft (lsf). While Sky City project clocked robust 1.24 lsf sales volumes, 30-40% of this was driven by subvention scheme. The subvention scheme has also aided sales at its Goregaon projects. However, the recent circular from NHB advising HFCs to desist from participating in subvention schemes could impact sales momentum for ORL in the interim although the company plans to offer bank-driven subvention schemes. Overall, we expect sales volume...

Oberoi Realty revenue decreased by 32% YoY and increased by 5.2% QoQ to Rs. 6.03 Bn. Residential segment experienced a sequential increase in pre-sales volume to 2.4 lakh sft.

Change in mix, drags EBITDA margins: Volumes were down 16% YoY (+65% QoQ) to 2,39,968sf in 1QFY20, primarily due to nil sales at the 360 West project (v/s 35,324sf in the year-ago period). Note that 360 West is a superluxury project, and sales are usually lumpy on a quarterly basis in such bigticket items. Overall booking value, thus, declined by 36% YoY to INR4,011m. Excluding the 360 West project, the sales performance was steady, in our view. Leasing revenue grew at a robust 28% to INR933m driven by Commerz II Phase I (+80% YoY) in 1QFY20. Overall revenue declined 32% YoY to INR6,033m (our estimate: INR7,106m) in the quarter. EBITDA margin shrank 1,300bp YoY to 39% (our estimate:...