Parikshit D Kandpal, CFA, Institutional Research Analyst, HDFC Securities.
Oberoi Realty - Launches awaited; will drive growth
Oberoi Realty (ORL) registered yet another quarter with strong presales of INR 11.6bn (+39.5/51.8% YoY/QoQ). ORL's flagship project Three Sixty West recorded presales of 73,281 sq.ft. valued at INR 6.1bn with an average realisation of INR 83,181. It has a strong sales pipeline for the next 12 months, with new towers expected to open up in Borivali and Goregaon and a new project launch in Thane targeted for Q3FY23. Furthermore, ORL took up an SRA commercial project (with ~95% of the site clearances in place) adjacent to its sky city project in Mumbai. Decision on Glaxo Worli-retail/office-shall be taken in Q3FY23. ORL has passed on 5-10% price hikes across projects w.e.f. October 10-12, 2022. Given the increased input cost, ORL is sure of taking further price hikes and will decide on Elysian Tower-C prices at the time of launch. We incorporate higher cost of capital (100bps) and maintain BUY, with an increased NAV-based TP of INR 1,138/sh as we roll forward to FY25 estimates.
Financial highlights: ORL reported revenue of INR 6.9bn (-8.7/-24.6% YoY/QoQ, a 21.4% miss). EBITDA: INR 3.1bn (-16.8/-36.9% YoY/QoQ, a 33.5% miss). EBITDA margin: 45.1% (-439/-882bps YoY/QoQ, vs. our estimate of 53.2%). Other income: INR 232mn (+62.6/+6.9% YoY/QoQ). Share of profits in associates and JVs: INR 1bn (18/453mn Q2FY22/Q1FY23). RPAT/APAT: INR 3.2bn (+19.5/-21%, YoY/QoQ, a 13.3% miss). Better-than-expected profit from JVs resulted in a lower miss.
Launch momentum strong; price hikes 5-10% across project portfolio: Oberoi registered presales at INR 11.6bn (+39.5/51.8% YoY/QoQ). For Q2FY23, the area booked was at 0.37msf (-16.5/-7.7% YoY/QoQ). Q2 collections came in at INR 8.7bn (+62/+55.4% YoY/QoQ). ORL's flagship project Three Sixty West recorded its maiden presales at 73,281 sq.ft., valued at INR 6.1bn with an average realisation of INR 83,181. With new towers in Borivali and Goregaon Garden City expected to be launched, plus with the unsold Mulund inventory, the Worli project, and the Thane project (to be launched by Q3FY23) on the anvil, ORL has a strong sales pipeline for the next 12 months.
Balance sheet position comfortable: The consolidated gross/net debt stood at INR 30/19.8bn vs. INR 28.6/16.7bn as of Mar'22, with net D/E at 0.18x (vs. 0.16x as on Mar'22). ORL generated a positive CFO of INR 1.5bn in H1FY23. Strong cash flow generation is expected from new projects like Three Sixty West as well as the Mulund and Borivali projects.
Shares of Oberoi Realty Limited was last trading in BSE at Rs. 864.45 as compared to the previous close of Rs. 857.65. The total number of shares traded during the day was 45173 in over 3839 trades.
The stock hit an intraday high of Rs. 877.20 and intraday low of 850.15. The net turnover during the day was Rs. 38915329.00.