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Set for a cracker of a festive season

Oberoi Realty (OBER) has clocked Q2FY22 sales bookings of Rs8.3bn with no new launches and this performance is close to Q4FY21 sustenance sales which were at Rs9.7bn excluding Elysian Goregaon Tower A launch. OBER has recently launched Elysian Tower B in the last week of Oct’21 and has already sold inventory worth Rs7.9bn within a week of the launch. OBER is targeting further launches in H2FY22 across Thane and Borivali to coincide with the festive season. While exact timing and quantum of launches is awaited, we expect OBER to clock at least Rs40bn of sales bookings in FY22E and over Rs50bn each in FY23-24E owing to new launches and inventory in Worli/Mulund/Borivali projects. We revise our target price to Rs944/share (earlier Rs938) which assumes a 20% premium to NAV considering growth opportunities and retain our HOLD rating. Key upside risk is higher than expected price increase while key downside risk is a decline in demand for residential properties.

* Strong sustenance sales reflected in Q2FY22 operational performance: While OBER clocked Q1FY22 sales bookings of Rs1.7bn, it has seen a strong rebound in Q2FY22 with sales of 0.44msf worth Rs8.3bn across 200 units. Considering the weak base of Q2FY21 and Q1FY22, it is better to compare this performance to Q4FY21 where the company had clocked sales bookings of Rs19.6bn of which Rs9.9bn had come from Elysian Tower A while Rs9.7bn had come from sustenance sales. Hence, the Q2FY22 sales of RsRs8.3bn is impressive considering no new launches and the Occupation Certificate (OC) for 360 West, Worli project expected in Q3FY22.

* All eyes on new launches in H2FY22: OBER is targeting launches in H2FY22 across Thane (expected in Dec’21) and Borivali/Goregaon and other ongoing projects once lockdowns are eased. The company has already launched Elysian, Goregaon Tower B in the last week of Oct’21 and has already sold inventory worth Rs7.9bn within a week of the launch. While exact timing and quantum of launches is awaited, we expect OBER to clock at least Rs40bn of sales bookings in FY22E and over Rs50bn each in FY23-24E owing to new launches and completed/near completion inventory in Worli/Mulund/Borivali projects. In the annuity business, 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 over FY23-24E.

* Company to focus on non-MMR and society redevelopment projects going forward: As per OBER’s management, the company is gearing up to enter the society redevelopment market in Mumbai and is also evaluating markets outside MMR and has already hired a few key personnel to drive this initiative forward. The company is looking at society redevelopment projects in MMR having a revenue potential of at least Rs5-7bn each and for its foray outside MMR, it is looking to invest up to Rs10bn in a staggered manner for a couple of projects having 2-3msf of saleable area.

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