IGI Logo

 On the lookout for potential land deals, strong cash flows

Oberoi Realty (OBER) reported a steady quarter with booking value of INR 6.3bn (down 68% YoY; down 45% QoQ) as the quarter witnessed only one launch (Tower G at Sky City) and no units were sold at Three Sixty West. On the business development front, OBER acquired a land parcel at Pokhran Road, Thane, adding another 2.25msf of saleable area. Given the strong balance sheet (0.21x net debt to equity) and possibility of Three Sixty West / Mulund cash flows being unlocked, it can acquire multiple projects and has signed an MoU in Gurgaon. Execution remains good across its existing projects. OBER has multiple growth triggers including i) Goregaon / Thane launches, ii) continued momentum in Three Sixty West and iii) more project acquisitions. We maintain a BUY rating with a Sep’23 TP of INR 1,030 (implying 23% upside). Key risks: Slowdown in residential segment / delay in launches of key projects.

* Absence of launches; Booking value driven largely by Sky City tower launch: Area sold came in at 0.36msf (down 65% YoY; down 3% QoQ) and sales were largely led by Sky City, Borivali - 73% of the total booking value (Exhibit 3) as the company commenced bookings for Tower G at Sky City. Booking value came in at INR 6.31bn (down 68% YoY; down 45% QoQ) and no sales at Three Sixty West were booked. Overall collections declined to INR 4.23bn (down 56% YoY; down 51% QoQ) but should recover on account of sale of ready inventory at Worli and Mulund. Mulund is in advanced stages of completion (Eternia - Part OC received and Enigma – Part OC received). OBER will further opportunistically look to launch two towers (out of a possible three) in Goregaon based on the demand-supply situation over the coming quarters.

* Business development activities: OBER completed acquisition of an 8 acre land parcel from Blue Star Limited for INR 1.92bn at Pokhran Road 2, Thane. The land adjoins the existing 60 acres that Oberoi owns in Thane, giving it an additional 2.25msf of saleable area (2.1msf residential + 0.15msf commercial). OBER also concluded its purchase of residential premises in its Three Sixty West project constructed by Oasis Realty (Area: 0.52msf; Units: 63; Total amount: INR 34.03bn; Stamp duty and other charges: INR 2.04bn; share of income tax liability discharged through Oasis Realty: INR 6.05bn) and the management sees net debt remaining at current levels (0.21x as of Dec’22) despite the transaction as collections are likely to increase. Recently, a block deal worth over INR 15bn was concluded at Three Sixty West, leaving the JV partner with minimum inventory, and the management has indicated a healthy sales pipeline.

* Reported financials: Reported revenue came in at INR 16.24bn (+97% YoY; +136% QoQ) while EBITDA margin came in at 57.6% (+1,827bps YoY; +1,256bps QoQ), EBITDA stood at INR 9.35bn (+189% YoY; +202% QoQ) mainly on account of higher revenue recognition from i) Enigma, Mulund (INR 4.59bn; 31% of total revenue recognised) ii) Eternia, Mulund (INR 3.79bn; 26%) iii) Sky City, Borivali (INR 3.26bn; 22%) iv) Elysian, Goregaon (INR 2.81bn; 19%), and v) Maxima, Andheri (INR 0.33bn; 2%). PAT came in strong at INR 7.03bn (+50% YoY; +121% QoQ).

* We maintain ‘BUY’ with Sep’23 TP of INR 1,030: We maintain a ‘BUY’ rating with a Sep’23 TP of INR 1,030 (implying 23% upside).

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361

Above views are of the author and not of the website kindly read disclaimer