Oberoi Realty - Q2FY21 First Cut - ICICI Securities

CMP - Rs. 389; MCap: Rs. 14,150 crore

Oberoi Realty reported strong operational performance with better than expected sales volumes driven by strong recovery. The financial reported performance also looked optically better owing to recognition of mall revenues of Q1, resulting in superior margins and bottomline.

Q2FY21 Earnings Summary

- The company reported sales volume of 1.30 lakh sq feet (I-direct estimate: 0.98 lakh sq feet) vs. 1.39 mn sq feet in Q2FY20, reporting a decline of ~6.6% YoY (much better than our expectations of ~30% decline). The sales value was up 1.4% YoY at Rs. 327.3 crore, given mix towards higher realisation projects. While relatively lower decline YoY is surprisingly positive, the key monitorable will sales volume traction going ahead coupled with launch pipeline

- On the financial front, Reported revenues de-grew by 35.7% YoY to Rs. 316.1 crore in Q2FY21(our estimates: Rs. 320 crore). The residential segment revenue recognition stood at Rs. 214.2 crore (vs. Rs. 351.4 crore in Q2FY20) owing to weaker than expected execution possibly due to heavy monsoon. The washout performance in hospitality continued with revenues of Rs. 6.4 crore vs. Rs. 31.2 crore in Q2FY20). The company, however, recognised the revenues of Oberoi mall in Q2 for Q1 as it had not done so last quarter due to uncertainty on account of Covid -19 impact

- Reported EBITDA margins were up 15.7 percentage points YoY to 59% on account of higher mix of rental revenues (higher margins) coupled with lower cost recognition as there was slower execution in the residential segment

- The reported PAT was higher at Rs. 138.7 crore (our estimates Rs. 84.9 crore), up 0.5% YoY, owing to beat at operating level

- The company has issued two tranches of Non-convertible debentures totalling Rs. 698 crore, which we believe is to keep liquidity high in case sales weakness is seen coupled with capitalising on any opportunistic deal

The near term challenges in the hospitality segment and mall are visible for the company, but the company is well positioned to tide over the same with comfortable debt levels and sufficient liquidity. The recovery in residential segment is positively surprising but traction ahead will be key. We seek further clarity on the residential launches and overall demand outlook coupled with status of malls and the hospitality segment from the management. We will review our estimates and come out with a detailed report post the conference call.

Shares of OBEROI REALTY LTD. was last trading in BSE at Rs.388.9 as compared to the previous close of Rs. 387.15. The total number of shares traded during the day was 6848 in over 462 trades.

The stock hit an intraday high of Rs. 390.6 and intraday low of 382. The net turnover during the day was Rs. 2649395.

Source : Equity Bulls

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