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Muted results: Pokhran project launch delayed

Oberoi Realty (ORL) is a premium real estate developer with over 45 completed projects spread across strategic locations in Mumbai. The company also acquired about 15 acres land parcel in NCR to expand its market.

• Consolidated revenue fell 35.3% YoY to Rs. 1,054cr in Q3FY24, primarily due to lower sales velocity from residential properties. • EBITDA margin declined 800bps YoY to 51.1%, due to higher operating costs. Profit after tax (PAT) fell 48.7% YoY to Rs. 360cr. • Lower pre-sales, margin contraction, and muted earnings performance are the key concerns for the company in the near term. Furthermore, the highly anticipated Pokhran road project has been deferred, adding to the company's challenges. Hence, we remain cautious and maintain our SELL rating on the stock, with a rolled-forward target price of Rs. 1,176, based on 2.3x FY26E book value per share (BVPS).

Lower pre-sales, large decline in margins

In Q3FY24, ORL reported a 35.3% YoY decline in consolidated revenue to Rs. 1,054cr (-13.5% QoQ), due to lower revenue from the sales of residential properties at Rs. 840cr (-43.2% YoY/-17.7% QoQ). However, rental income surged 63.4% YoY to Rs. 150cr and revenue from hospitality grew 17.6% YoY to Rs. 49cr. The company achieved pre-sales booking of 2.6 lakh sq ft, with a value of Rs. 787cr (+24.8% YoY/- 18.5% QoQ), driven by Forestville, Sky City, and Enigma projects. These three projects contributed 78% to the total pre-sales value. EBITDA margin shrank 800 bps YoY to 51.1% (-350bps QoQ), due to higher operating costs at Rs. 1,730cr (+87.9% YoY). Consequently, PAT declined 48.7% YoY to Rs. 360cr.

Key highlights

• The company has recently expanded its presence in the NCR region, by acquiring a 14.8-acre land parcel from Ireo Residencies in Gurugram. • The company also concluded a 6.4-acre land parcel in Thane. This brings the company's total land at Pokhran road to about 75 acres. • The launch of a new tower in Elysian at Oberoi Garden City in Goregaon, Mumbai, earlier this year has yielded a pre-sales of Rs. 882cr. • The company expects to achieve an annuity rental run-rate of over Rs. 1,800cr from its three commercial assets: Commerz-III (Rs. 600 to 700cr), Borivali mall (Rs. 300 to 350cr), and Hotel (Rs. 1,150 to 1,250cr). • In Q3FY24, the number of units booked increased 19.3% YoY to 216 units (vs. 151 units in Q2FY24), with a booking value of Rs. 791cr vs. Rs. 632cr in Q3FY23. Carpet area booked also rose to 2.6 lakh sq. ft. from 2.2 lakh sq. ft. in Q3FY23.

Launch of the Pokhran road project delayed

Management stated they already have a strong pipeline and hence, have decided to postpone the launch of the Pokhran road project to the festive season, next year. However, the company is expected to start work immediately on the same with five towers spanning 35-40 lakh square feet, a five-star hotel and an international school.

Valuation

Oberoi Realty reported a subdued pre-sales performance, margin contraction, and a significant decline in earnings performance during the quarter. The company has observed lower traction in its current projects and has deferred the launch of its large Pokhran road project. Therefore, we maintain a cautious outlook and reiterate our SELL rating on the stock with a rolled-forward target price of Rs. 1,176 based on 2.3x FY26E BVPS.

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