Neutral Oberoi Realty for the Target Rs 2,000 by Motilal Oswal Financial Services Ltd
Leapfrogging to cross INR100b in annual pre-sales In-line 1Q; NCR performance to boost FY27 pre-sales
In 1QFY27, Oberoi Realty (OBER) reported pre-sales of INR10.5b (largely in line with our estimates of INR9.9b), down 36% YoY, supported by sustenance sales. It commenced bookings at its Carter Road project – Oceanic, which contributed INR1.5b to pre-sales (~14.5% share). In Jul’26, OBER witnessed bumper INR81b pre-sales at its maiden project in the NCR, which would bolster FY27 pre-sales. Other projects in the FY27-28 launch pipeline include the Fairview (Malabar Hill), Aadarsh Nagar and Peddar Road redevelopment, Alibaug, Tardeo, Mulund, and new phase each at Forestville, OGC Thane and NCR. We increase our presales estimates to INR137b in FY27 (+154% YoY) and INR111b in FY28 (we have factored in staggered sales at the remaining phase of NCR; 19% decline due to a high base in FY27).
Annuity and hospitality portfolio ramping up well
Revenue from rent grew 18% YoY to INR3.3b in 1QFY27. Occupancy remained healthy at 96-100% in its Commerz assets (all three towers). Sky City Mall witnessed improvement in occupancy to 82% in 1QFY27 from 72% in 4QFY26. Overall occupancy of the annuity portfolio stood at 95%, with an EBITDA margin of 93% at the end of the quarter. On the back of higher occupancy and rental escalations, we expect annuity income CAGR at 10% to INR13.5b during FY26- 28E.
Hospitality revenue stood at INR469m in 1QFY27, up 10% YoY, while RevPAR increased 8% YoY to ~INR11,492 and ARR rose 2% YoY to INR15,240. Occupancy stood at 75%, up 300bp YoY and down 200bp QoQ. The Ritz Carlton (Three Sixty West) and Marriott Hotel in Borivali are expected to be operational in the next two years. Hence, we expect 56% CAGR in hospitality revenue to INR4.8b during FY26-28E.
Balance sheet remains sturdy
Despite a 36% YoY drop in pre-sales, the decline in collections during 1QFY27 was arrested at 8% YoY to ~INR9.2b. During FY26-28, we estimate a 27% CAGR in collections to INR69b on the back of pre-sales growth and healthy execution. Net debt-to-equity ratio stood at 0.04x. Considering strong cash flows from the residential, annuity and hospitality segments, we expect net cash at INR4.8b/INR14.4b in FY27/28E.
Valuation and view
* OBER is expected to report a jump in pre-sales in FY27 given the robust response in NCR and launch pipeline. Further, the strong ramp-up in business development activity has improved the medium-term growth visibility. The annuity and hospitality segments are scaling up well, and with more additions already planned, we expect profitability to grow strongly in the coming years. Further, it has one of the strongest balance sheets among peers, which lends comfort.
* We value the residential business on NAV basis and assign a 35% premium to capture the increased focus on BD (our calculations suggest that the company can command 50% NAV premium). Further, we value the annuity portfolio at 7.5-8.0% cap rate and the hospitality business at 18x EV/EBITDA on FY28E.
* We maintain our Neutral rating with an SoTP-based TP of INR2,000.
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