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Maintain BUY on Oberoi Realty - Sharp recovery - HDFC Securities

Posted On: 2020-10-20 01:11:29

Mr. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities

ORL surprised positively as pre-sales volume recovered to 93% of 2QFY20 level. Booking value also rebounded to Rs 3.3bn during the quarter (vs 3.2bn in 2QFY20) on higher realization. We expect the momentum to continue for ORL, given the stamp duty cut, low-interest rate, strong brand recognition and market consolidation. Residential launches remain on track in Borivali, Goregaon and Thane. Besides, the company is mulling a platform to unlock value from existing commercial office space. We tweak our FY21/22/23 estimates by +2/-4/-3% and maintain BUY with a revised TP of Rs 497.

2QFY21: ORL reported 2QFY20 revenue at Rs 1.2bn (-36% YoY, 168% QoQ), 7% ahead of our estimates. Revenue includes Rs 145mn mall rental income of 1QFY21. RPAT came in at Rs 1.4bn, a decline of 8% YoY and a beat of 49% on our estimates. As per management, labor availability has improved to pre-COVID level; hence, execution could improve in 2HFY21.

Sharp rebound in pre-sales: Oberoi Realty reported robust pre-sales volume as it sold 42 units in the quarter, compared to 5 units in 1QFY21. Basis management commentary, sales would have been better if not for Shradh, an inauspicious period for buying, during September. Although, pre-sales volume fell by 7% YoY, booking value increased by 1%, as realization in the majority of the projects improved on sale of higher floor apartments.

50% rent waiver for the mall tenants: ORL had offered 50% rent waivers to tenants of the Oberoi Mall and in turn had asked to extend the lease term by 1 year. As per ORL, tenants responded favorably and have opened up most of the stores. Rental collection in the commercial portfolio remained stable sequentially, as ORL reported Rs 380mn revenue from Commerz I & II.

Balance sheet position comfortable: Consolidated net debt remained stable at Rs 13.6bn (vs Rs 13.7bn on Jun-20 end) with net D/E at 0.15x (0.16x on Jun-20 end), which is comfortable in our view. However, gross debt increased by Rs 2bn, as ORL shored up liquidity for potential expansion opportunities. With the sequential improvement in collections to Rs 1.8bn (vs 0.85bn in 1QFY21), ORL generated positive operating cash flow of Rs 1.2bn.

Shares of OBEROI REALTY LTD. was last trading in BSE at Rs.390 as compared to the previous close of Rs. 389.15. The total number of shares traded during the day was 12518 in over 897 trades.

The stock hit an intraday high of Rs. 402.3 and intraday low of 386.8. The net turnover during the day was Rs. 4945664.

Source: Equity Bulls

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