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Weak pre-sales weighs quarter performance

Our view

Oberoi Realty (OBER) achieved presales of 0.37msf translating to sales value of Rs11.6bn wherein 360 West contributed 53% to the total sales while remaining was contributed by Sky City, Elysian & Enigma and company collected 8.8bn in Q2FY23. Oberoi Mall achieved 95.5% operating margin over the revenue of Rs347mn. Office assets clocked revenue of Rs364mn higher by 4% q/q and declined by 7.1% y/y with an EBITDA margin of 92%. The Westin posted sustained revenue of Rs341mn with the EBITDA margin of 32.5% (-654bps q/q) with ARR of Rs9,546/night (4.7% q/q) and RevPAR of Rs7,891 (-5.2% q/q). OBER is geared up to launch Pokhran & Kolshet, Thane along with one tower in Borivali in Q3FY23.

In Q2FY23, post receiving occupation certificate 360 West sales has picked up and is expected to sustain in coming quarters as well. OBER also has a strong pipeline for launch across its projects which is expected to yield strong presales for the company. Construction of commercial assets is on track and Borivali Mall and Commerz-III are expected to be commissioned in the next 18months. We believe with strong demand and consolidation in the sector, better players like OBER will always have an upper edge on the back of quality product, delivery track record, D/E of 0.27x and supply side constraint. We continue to give a 20% premium to the current portfolio for being leader in the premium residential segment & arrived at SoTP based NAV of Rs1028/share. We recommend ‘ADD’ rating with 19% upside.

Result Highlights:

* Consolidated revenue for the quarter reported at Rs6,886mn (-24.6% q/q & -8.7% y/y), a miss of 48% from our estimate because of weak presales.

* EBITDA came in at Rs3,104mn (-36.9% q/q & -16.8% y/y) lower by 54% from our estimate while margin reported at 45% lower by 882bps q/q & 439bps y/y.

* Residential projects contributed 85% while 5% each was contributed by Retail Mall, Office asset and hotel each to the total revenue. Residential contributed 75% to operating profit and 11.7% each was contributed by Retail Mall and office assets and only 3.6% by hotel.

* Consolidated Adjusted PAT reported at Rs3186mn (-1.7% q/q & 12.7% y/y), and net margin came in at 46.3% higher by 213bps q/q and 1093bps y/y.

* Net debt increased to Rs20532mn in a quarter (Q1FY23: Rs15940mn) and Debt/Equity moved up to 0.27x in quarter from 0.26x in Q1FY23.

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