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All eyes on upcoming launches

Oberoi Realty’s (OBER) Q1FY22 results were a washout along expected lines with quarterly sales bookings of just Rs1.7bn and mall/hotel operations also being impacted owing to the second Covid wave in Mumbai. While Q2FY22 is also expected to be a muted quarter owing to Covid impact, OBER is targeting launches in H2FY22 across Thane and Borivali/Goregaon and other ongoing projects to coincide with the festive season.

While exact timing and quantum of launches is awaited, we expect OBER to clock at least Rs25bn of sales bookings in FY22E and over Rs40bn each in FY23-24E owing to new launches and completed/near completion inventory in Worli/Mulund/Borivali projects. We retain our BUY rating with a revised target price of Rs792/share (earlier Rs647) as we roll forward to Mar’22 NAV and retain our 10% premium to NAV considering growth opportunities. Key risks to our call are a decline in demand for residential properties and higher costs owing to rising material prices.

* Covid woes impact Q1FY22 performance: After recording its highest ever quarterly sales bookings in Q4FY21 at Rs20.5bn, OBER clocked just Rs1.7bn of sales bookings in Q1FY22 owing to second Covid wave impact in Maharashtra. Along expected lines, while office rental collections remained resilient, mall shutdowns and weak hotel occupancies/ARRs mirrored Q1FY21 performance. However, a silver lining was residential collections of Rs6.5bn largely from Elysian, Goregaon (launched in Q4FY21) and Sky City, Borivali projects.

* FY22 likely to be a repeat of FY21 performance: While Q2FY22 is expected to be a muted quarter owing to second Covid wave impact, OBER is targeting launches in H2FY22 across Thane and Borivali/Goregaon and other ongoing projects once lockdowns are eased. While exact timing and quantum of launches is awaited, we expect OBER to clock at least Rs25bn of sales bookings in FY22E and over Rs40bn each in FY23-24E owing to new launches and completed/near completion inventory in Worli/Mulund/Borivali projects.

In the annuity business, while OBER remains on track to reach Rs10bn of exit rental income by Mar’24 with Commerz III office and Borivali mall expected to commence operations, FY22 is likely to be a muted year for existing offices and malls owing to continued Work-from-Home impact and intermittent mall shutdowns. We model for the Borivali mall to commence operations in H2FY23 and Commerz III office to commence in H1FY24.

* Company to focus on society redevelopment projects going forward: As per OBER’s management, the company is gearing up to enter the society redevelopment market in Mumbai and has already hired a few key personnel to drive this initiative forward. The company is looking at projects having a revenue potential of at least Rs5-7bn each and is in the process of finalising an agreement with Shivshahi society in Worli as the first such project under this vertical.

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