Buy Oberoi Realty Ltd For Target Rs. 620 - Yes Securities
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Result Highlights
* In Q4FY21, OBER has clocked 1.06msf (108%QoQ/734%YoY) of new bookings which translates in sales of Rs19.6bn (102%QoQ/750%YoY) and collected Rs6.4bn (‐13%QoQ/60%YoY). 74% of total sales volume was contributed by newly launched phase of Sky City, Borivali (154units, 0.26msf) and Elysian, Goregaon (154units, 0.53msf).
* Oberoi mall operations was affected by the Covid‐19 second wave and revenue for Q4FY21 declined to Rs301.5mn (‐40%QoQ/‐24%YoY) and EBITDA margin dropped by 1365bps on sequential basis to 83% while occupancy remained flat at 93.5%.
* Commerz & Commerz II reported the revenues of Rs67.4mn (10%QoQ/52%YoY) and Rs295mn (‐13%QoQ/‐8%YoY) while reported EBITDA margins declined for both assets to 73% & 91.3% on sequential basis by 1901bps & 669bps. Commerz II witnessed stiff drop in the average rental rate by 10% on sequential basis to Rs133/sft/month Hospitality asset turned EBITDA positive with Rs4mn and EBITDA margin of 3.28%. Occupancy (44.2%) & RevPAR (Rs2285) also recovered in Q4FY21.
* For FY21, OBER reported revenue of Rs20.5bn (‐8%YoY), EBITDA Rs10bn (‐ 5%YoY), Adj.PAT Rs7.4bn (7%YoY). EBITDA margin and adjusted profit margin came in at 48.7% & 36% up 190bps & 521bps respectively.
* Gross debt/equity at the end of Q4FY21 stands at 0.16x against the 0.18x in FY20
Our view:
OBER has done robust sales of 1.72msf in a truncated FY21 on the back of new launches and ongoing projects. We believe OBER will continue to achieve good residential sales as consolidation in the sector further intensifies due of Covid‐19 second wave disruption and potential supply constraint. With OBER’s strong balance sheet with D/E of 0.16x and healthy cashflow, company is on track to commission its planned annuity assets before FY24. We initiate coverage with ‘BUY’ rating and target NAV of Rs620/share (WACC 12.4%, Cap rate 9% & 15xFY22 EV/EBITDA).
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