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Multiple triggers ahead

Oberoi Realty (OBER) clocked Q1FY23 sales bookings worth Rs 7.6bn (I-sec estimate of Rs8.0bn) with no new launches and the quarter’s sales have tracked the typical quarterly sustenance sales of Rs8-9bn seen since Q2FY22. The launch of the Thane project in Q2FY23 and receipt of the Occupation Certificate (OC) at 360 West, Worli in Jun’22 may be the key drivers for FY23 sales. While exact timing and quantum of launches is awaited, we expect OBER to clock at least Rs58bn of sales bookings in FY23E and FY24E vs. Rs38.8bn in FY22 and Rs34.3bn in FY21. Further, with the Borivali mall and Commerz III office set to see rentals commence in FY24E, we expect OBER’s rental income to rise to Rs8.2bn in FY24E from Rs2.4bn in FY22. We maintain our BUY rating with a revised SoTP based target price of Rs988/share (earlier Rs943) which assumes a 20% premium to NAV. Key risks are a decline in demand for residential properties and weakness in office leasing.

Sustenance sales remain strong:

OBER clocked Q1FY23 sales bookings worth Rs 7.6bn (I-sec estimate of Rs8.0bn) with no new launches and was were driven by Elysian, Goregaon (Rs3.0bn), Sky City, Borivali (Rs2.6bn), Eternia, Mulund (Rs0.9bn) and Enigma, Mulund (Rs0.8bn). The quarter’s sales bookings have tracked the typical quarterly sustenance sales of Rs8-9bn seen since Q2FY22. In the office assets, Q1FY23 occupancies at Commerz I, Goregaon and Commerz II, Goregaon remained flat QoQ at 54% and 81%, respectively. However, the Oberoi Mall at Goregaon saw strong recovery with Q1FY23 rental income of Rs0.4bn (similar to Q1FY20 pre-Covid levels) while the Westin, Goregaon hotel clocked best ever quarterly occupancy of 91% with a RevPAR of Rs8,326 which is 16% above Q1FY20 levels.

All eyes on Thane launch/Worli OC in Q2FY23:

OBER is targeting to launch the Thane project in H1FY23 and has paid FSI premiums of Rs2bn and will have ~6msf of area available for launch out of the 9-10msf of overall area. Further, in Jun’22, the company has received the Occupation Certificate (OC) at 360 West, Worli which may be a key driver for FY23 sales. While exact timing and quantum of launches is awaited from the company’s quarterly results call, we expect OBER to clock at least Rs58bn of sales bookings in FY23E and FY24E (Rs38.8bn achieved in FY22) owing to new launches and completed/near completion inventory in Worli/Mulund/Borivali projects. The company had also announced two land deals in Q4FY22 at Peddar Road, South Mumbai (0.13msf) and Kolshet, Thane (2.5msf) which may be launched in FY23E as well depending on approvals coming through.

Ongoing annuity capex to peak in FY23E and accrue to rentals from FY24E:

The company’s Borivali mall and Commerz III offices are set to reach an advanced stage of completion in FY23E and we expect OBER’s rental income to rise to Rs8.2bn in FY24E from Rs2.4bn in FY22 as these projects commence rentals from FY24E.

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