Buy Oberoi Realty Ltd For Target Rs.1,001 - Yes Securities
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Robust pre-sales, Thane deferred again
Our view
OBER has exhibited strong pre-sales for Q2FY22 on the back of strong demand in the residential space. With bottoming vacancy levels for office and increased enquires for new lease gives us confidence that Commerz-III lease should happen smoothly once it is commissioned. Additionally, The Westin’s recovery and Malls timely reopening (just around festive season) will allow OBER to fully recover from the Covid-19 disruption.
Result Highlights
* OBER recorded strong pre-sales of 201units with total area of 0.36msf which translates in Rs.8.8bn sales value and collected Rs5.2bn in Q2FY22 while witnessed one cancellation in 360 West.
* Mall has reopened on 24th Aug-21 which has impacted mall revenue for Q2FY22 and recorded at Rs.37.8mn (+18.5%QoQ/ -89.2%YoY) with an 50.31% operating margin and improved occupancy of 94.62% (92.61% in Q1FY22).
* Commerz clocked revenue of Rs71.3mn (-0.8%QoQ/ 29.9%YoY) with stable operating margin of 91.63% and occupancy of 53.54%. Commerz-II too performed stable with occupancy of 97.39% and reported revenue of Rs320.5mn with relatively higher margin of 94.71%. For both office assets rentals remained stable at Rs.142/sft/month and Rs140/sft/month respectively.
Valuation
OBER is actively evaluating opportunities in other geographies (tentatively NCR) and for society redevelopment too. Execution of all the capex projects is running as per commissioning timelines mentioned by the management. We believe with consolidation witnessed in sector, better player like OBER will always have upper edge on the back of quality product, delivery track record and lean balance sheet (D/E of 0.22x). We continue to give 20% premium to current portfolio for being leader in premium residential segment and retained our SoTP based NAV of Rs1001/share. As stock has moved up sharply, upside is capped at 4% to our estimates hence we change our rating from BUY to ADD.
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