Oberoi Realty Ltd. share price target

ICICI Securities Ltd | Retail Equity Research Oberoi Realty's (ORL) Q1FY18 sales performance was below our expectations due to poor performance in Eternia & Enigma projects. On the financial front, the result was largely in line with our estimates ORL's Q1FY18 sales volumes de-grew 27.7% QoQ to 0.97 lakh square feet (sq ft) (sales value: | 287.0 crore). It was below our estimate of 1.05 lakh sq ft mainly due to lower-than-expected sales volume of 3120 sq ft in Eternia' project (our expectation: 10000 sq ft)...

Maintain NEUTRAL with a TP of Rs 405/sh. ORLs 1QFY18 financial performance was muted, with net profit coming in 3.2% below our estimates. While ORLs dull performance was not a surprise, any meaningful delay in pre-sales recovery (over 2HFY18E) may lead to Worli/Mulund projects missing the FY18E revenue recognition hurdle.

Revenue rose by 14.83% to Rs. 289.53 Cr in Q4FY17 when compared to the previous quarter

ICICI Securities Ltd | Retail Equity Research Oberoi Realty's (ORL) Q4FY17 sales volumes grew 27.5% sequentially to 1.35 lakh sq ft with sales value of | 345.4 crore. Sales volumes were above our estimates of 1.23 lakh sq ft mainly on account of higher-than-expected sales volume of 45427 sq ft in Three Sixty West' project (our expectation: 25000 sq ft)...

ORL shrugged off the demonetisation effect in 4QFY17, with net profit beating est (49.9% ahead of estimates). Pre-sales grew 26.3% QoQ to ~0.14mn sq ft, and Rs 3.5bn in value terms ( 27.9% QoQ). Sales traction improved in Goregaon, Mulund and Worli. Organised players like ORL are expected to benefit from the implementation of RERA. We model pre-sales pickup from 2HFY18E, as new launches pan out.

ICICI Securities Ltd | Retail Equity Research Oberoi Realty's (ORL) Q3FY17 sales volumes de-grew 89% YoY/ 40% QoQ to 1.06 lakh sq ft (our estimate: 1.12 lakh sq ft) on account of the high base in Q3FY16 when the SkyCity project was launched Revenues de-grew 67.9% YoY to | 250.0 crore (estimate: | 253.8 crore) on account of the higher base as the company had started revenue recognition for the Esquire project in Q3FY16 The EBITDA margin expanded 814 bps YoY to 50.1% (our estimate:...

ORL delivered stellar 2QFY17 performance, net profit 6.5% ahead of our estimates. 2QFY17 Pre-sales of ~0.18mn sqft was driven by Worli project (Three Sixty West) which clocked 68,288sqft in presale and Rs 3bn in pre-sale value. Pre-sale was muted in Exquisite whilst Esquire, Eternia and Skycity saw marginal pickup.

ICICI Securities Ltd | Retail Equity Research Oberoi Realty's Q2FY17 sales performance was better-than-expected mainly on the back of the Three Sixty West project. On the financial front, the result was largely in line with our estimates...

Oberoi Realty’s (ORL) revenues grew 51.6% YoY to | 320.0 crore (our expectation: | 244.9 crore) mainly on account of better-thanexpected project execution. Revenue recognition from the Esquire project came in at | 160.9 crore (our expectation: | 109.9 crore). EBITDA margin contracted 881 bps YoY to 52.1% due to a change in the project mix with the topline mainly driven by the Esquire project. However, the EBITDA margin was above our expectation of 48.2%.

Outlook and Valuation: Though there was a pick-up in execution, sales momentum has remained at lower level despite launch of Worli project. While they like ORL given the quality of land bank, healthy balance sheet, management bandwidth to execute projects, the stock has run up ~41.1% in the past six months. Going forward, see limited upside in the stock and do not expect a significant up-tick in sales volume in near term. Hence, they downgrade the stock to HOLD recommendation and maintain target price of | 340. Key risk: Further delay in launches & lower than expected sales volume.

ORL delivered a strong 1QFY17 beat, with revenue 36.2% ahead of estimates. Higher POCM contribution from Esquire and Prisma resulted in outperformance. ORL spent ~Rs 1bn of FSI between the two projects. 1QFY17 Pre-sales of ~0.15mn sqft was driven by Worli project (Three Sixty West) which clocked 55,320sqft in presale and Rs 2.4bn in pre-sale value. Pre-sale was muted in Exquisite, Esquire and Mulund projects. We look forward to stronger 2HFY17E as festive demand pick up along with Goregaon Phase 3 launch (~1.6 mn sqft).

Valuation: They have adopted the DCF methodology to arrive at ORL’s NAV. They value the residential real estate business at Rs 209/sh, hotels at Rs 25/sh, commercial annuity assets at Rs 110/sh, social infrastructure at Rs 9/sh, other assets at Rs 37/sh and net debt at Rs 9/sh to arrive at the total SoTP valuation of Rs 381/sh.Maintain BUY.