We maintain BUY with revised TP of Rs 500 (vs Rs 538 earlier) to factor in 10- 15% property price discount and recalibration of cap rates higher by 100bps to 11%. Although we expect luxury residential demand to be tepid, we remain constructive on ORL, given its comfortable balance sheet (net D/E 0.16x), strong brand recognition and new incremental 1.1mn sqft leasing in Commerz-3. We revise our EPS for FY21/22 by +38%/-35% as profit recognition for Worli 360W is expected to be in FY21E (vs FY22E earlier) and completion of residential projects could be delayed due to COVID-led disruption.
* 1QFY21: ORL reported 1QFY20 revenue of Rs 1.2bn, which is 80% YoY decline and missed our estimate by 56%. Despite a sharp decline in topline, ORL remained in green with APAT at Rs 280mn (-82% YoY) on better EBITDA margin (49% vs 39% in 1QFY20) and lower interest expense (Rs 179mn vs Rs 239mn in 1QFY20).
* Labor availability improving; focus on building inventory: Labor availability has improved to 60% from the low of 25% amid the lockdown period. With material shortage issues also sorted out, ORL is looking to build healthy inventory levels to cater to the post-pandemic pent-up demand. ORL is holding on to prices and expects payment deferrals through customized financial engineering.
* Presales dropped by 95%: Oberoi Realty sold only five units in the quarter as bookings dropped by 95% YoY to 12k sqft. Collections also fell by 85% to Rs 717mn. With the easing of the lockdown, site visits have increased though conversions are slow as customers are chasing discounts.
* Balance sheet position comfortable: Standalone net debt stood Rs 13.7bn at the end of 1QFY21 with net D/E at 0.16x, which is comfortable, in our view. Despite a sharp decline in pre-sales, ORL managed to generate positive operating cash flow of Rs 603mn in the quarter. COVID-19 hit properties Westin and Oberoi Goregaon mall do not require any funding from ORL.
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