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Launches drive Pre-Sales; Valuations Constrain Upside

Recommendation Rationale

* Annuities performing well: Commerz III and Skycity Mall had successful launches and are gaining traction. The office and retail operating revenue for the quarter reached Rs 264 Cr, while hospitality revenue stood at Rs 42.6 Cr. Both Commerz I and II are operating at high occupancies of 96%, delivering EBITDA margins of 88% and 93%, respectively. Commerz III reported a gradual increase in occupancy, reaching 83% for the quarter, with an EBITDA margin of 90%. Oberoi Mall maintained a strong 99% occupancy with an EBITDA margin of 96%, while Skycity Mall reported 50% occupancy with an 89% EBITDA margin. Management highlighted excellent traction across both new launches and expressed confidence in sustained demand trends going forward. In the hospitality segment, The Westin Mumbai reported 72% occupancy with relatively lower EBITDA margin of 38%.

* Sustenance Sales and Upcoming Launches: Oberoi reported pre-sales of Rs 1,639 Cr for Q1FY26, nearly doubling sequentially due to a significant surge in sales volumes. The strong performance was primarily driven by the Tower D launch of the Elysian project, which contributed approximately 69% of total pre-sales. The next major contributor was Oberoi 360 West, accounting for 13%. As of Q1FY26, the company has 3.57 Mn sq ft of unsold inventory across ongoing projects. Collections for the quarter stood at Rs 997 Cr.

* Regarding upcoming launches, the company does not anticipate any new projects in Q2. However, a tower launch in Borivali is expected in Q3, followed by launches in NCR and Peddar Road in Q4. For the Gurgaon project, all entitlements are in place, the office setup is operational, and demolition work has commenced. In Thane, the company plans to develop an international school and a mall, with physical work starting before the residential tower launches. The company envisions this as a second Goregaon in the making. On sustenance sales, the management guided for periodic sales spurts supported by strong momentum and high realisations.

* Strong Cashflows and Low Leverage: With a net debt-to-equity ratio of 0.01, the company is well-positioned to raise additional funds if needed. Oberoi has historically maintained a net debt-to-equity cap of 0.4, reflecting its financial discipline and resilience even during challenging business cycles. Annuity cash flows are expected to increase, further strengthening liquidity. This enhanced financial position improves the company’s ability to raise capital, supporting robust business development prospects. The company’s OCF stood at Rs 252 Cr, which is lower as all construction-related expenses are recorded under OCF rather than investing cash flows. Backed by strong margins and return ratios (ROE) above 15%, the company maintains a solid financial foundation with the capacity to undertake further business development. It is actively evaluating large land parcel acquisitions in the MMR and NCR regions and is well-equipped to execute them.

Sector Outlook: Positive

Company Outlook & Guidance: Oberoi has plans for additional launches in H2FY26 to capitalise on the festive season. Q2FY26 is expected to be seasonally soft due to the absence of new launches and relatively subdued sustenance sales. However, management remains optimistic about demand prospects and the ability to command premium pricing across both its residential and annuity portfolios. They anticipate strong spurts of volume pickup post the second quarter

Current Valuation: DCF-based valuation

Current TP: Rs 1,860/share (Earlier TP: Rs 1,860 /share).

Recommendation: With a 2% upside from the CMP, we change our rating from BUY to HOLD on the stock.

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