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Low-risk compounder

Power of cash coarsely overlooked

Oberoi Realty (OBER IN) boasts a sizeable, ready inventory of >INR 90bn; monetizing at a run rate (FY24) of ~INR 14bn annually. This along with INR 20bn of pending receivables (net of opex due) for collections positions the developer for high value, new business development (BD) Notably OBER has maintained financial discipline through cycles as evident in its fortress balance sheet and industry-best net gearing ratio of INR 180bn. This alone offers earnings visibility of four years at FY24 presales run-rate. Overall, surplus cash trajectory in the residential segment is set to average INR 42bn during FY25-27E, implying an attractive valuation of 11x FY26E FCFF for the residential business.

Fixing the gap in strategy for high volume / price-sensitive markets

Unlike Mulund, OBER is tapping the Thane market (20% of development business NAV - Net Asset Value) across two price points via Pokhran and Kolshet. The addressable market size of the two Thane micro markets within a 3km radius combined is >3x the size of Mulund (East + West). Notably the developer has consistently garnered ~10% absorption volume market share in Mulund

Gurugram market entry: booster shot to sales velocity

The developer is emerging as a multi-regional play with the entry in the Gurugram real estate market. Note that OBER is entering the NCR market following more than a decade of consideration, underpinning its cautious and well-thought strategy. Arguably, the stars are perfectly aligned for an entry into the Gurugram market, given: 1) the presence of only a handful of Grade A developers, 2) strong pricing power with the developers, and 3) witnessing the fastest cash conversion cycle among Tier 1 cities as evident in the high take rate of ~70% in FY24.

Industry best profitability in the residential segment

OBER’s land acquisition cost for outright purchases over the past 10 years cumulatively stands at INR180bn) in the last twelve months is set to fetch a >60% higher average price realization on sales vs. FY24.

Valuation: recommend Buy with a March 2025E TP of INR 2,350

The superior margin and cashflow profile in the residential segment underscores a premium for the business. We recommend Buy with a SOTP-based Mar ’25 TP of INR 2,350: development assets valued at +60% premium to GAV and annuity businesses at cap rate of 7.5%.. Key downside risks: delay in project launches and regulatory setbacks.

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SEBI Registration number is INH000000933