Buy Oberoi Realty Ltd For Target Rs. 910 - ICICI Direct
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Thane launch key near term trigger for sales volumes
About the stock: Oberoi Realty (ORL) is a Mumbai-focused premium real estate developer with a presence in the residential, commercial and hospitality segments.
* Residential portfolio of ~15.7 mn sq ft of ongoing projects and launches provides healthy growth and cash flow visibility over the medium term
Q2FY23 Results: ORL reported healthy sales value led by traction at Worli project.
* The sales value was at | 1156 crore, up ~39% YoY, 52% QoQ, largely led by Worli Project (sold eight units worth | 610 crore). We highlight that pricing of Worli 83181/sq feet has also shown ~63% increase than the last sale (recorded in FY21). In terms of overall sales volume, the company managed to sell 3.7 lakh sq ft area during Q2FY23, down 16% YoY
* Reported revenues were down 8.7% YoY at | 688.6 crore. The decline was owing to lower residential segment revenue recognition, which was at | 556.3 crore, down 17% YoY. EBITDA, at | 310.4 crore, was down 16.8% YoY. Thus, reported EBITDA margins were down 439 bps YoY to 45.1% due to project, revenue mix. PAT was at | 318.6 crore, up 19.5% YoY, given higher profit from share of JV (Worli Project)
What should investors do: ORL’s share price has grown at ~14% CAGR over the past five years.
* We maintain HOLD rating on the company. Further value accretion is expected to be seen with new foray into non MMR and society redevelopment projects. Thane launch also remains a key monitorable
Target Price and Valuation: We value ORL at | 910/share.
Key triggers for future price performance:
* Uniquely positioned in MMR’s premium residential segment; eyeing opportunities beyond MMR region over medium term
* Launch of Thane project, which will propel sales volume trajectory
* Strong cash flow visibility from ongoing and planned projects
Alternate Stock Idea: Besides ORL, we like Brigade in the real estate space.
* A play on strong portfolio of assets in southern market
* BUY with a target price of | 595
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