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Stellar sales in 360-West and Elysian boost growth Strong traction across projects

* Oberoi Realty’s (OBER) pre-sales grew 49% YoY to INR14.4b (80% above estimate) in 2QFY25, driven by strong bookings at ‘360-West’ project in Worli, which contributed INR6.6b to pre-sales across bookings of six units.

* Elysian Goregaon’s pre-sales jumped 147% YoY to INR3.2b after the successful launch of the third tower in 4QFY24. Sales traction was weak at Borivali (INR1.3b), while at Mulund (INR2.7b), it was higher by 25% YoY and doubled sequentially. Forestville Thane (launched in 3Q) clocked bookings of INR0.6b across 29 units.

* Collections grew 9% YoY to INR12.1b. OBER generated OCF (post WC) of INR8.4b, which was partially utilized to reduce debt. Net debt stood at INR2.8b vs. INR8.4b as of Jun’24, with a D/E ratio of 0.02x.

* P&L performance: Revenue rose 8% YoY to INR13b (27% above est.), led by higher recognition in Elysian. EBITDA stood at INR8.1b, up 28% YoY, led by 10pp margin expansion to 62% due to product mix. PAT, at INR5.9b, rose 29% YoY and was 41% above our estimate. Margin stood at 45%.

* For 1HFY25, revenue grew 28% YoY to INR27.3b, achieving 48% of revised FY25E of INR56.4b. EBITDA stood at INR15.5b, up 52% YoY, led by 8pp margin expansion to 60% due to product mix. PAT, at INR11.7b, rose 51% YoY with margin of 51%. Commerz III incremental occupancy boosts rentals; hospitality business steady

* Following the Commerz III augmentation in 1QFY25, occupancy rose to 65% from 54%, resulting in revenue growth of 41% QoQ to INR0.9b. Occupancy at Commerz II was steady at 93%, while Commerz I, with 84% occupancy, is almost fully leased out. OBER reported total office revenue of INR1.4b (+27% QoQ), with an EBITDA margin of 88%.

* The Oberoi Mall clocked a 34% YoY jump in revenue, fueled by the increase in both area and occupancy. On a blended basis, the commercial segment generated EBITDA of INR1.7b and a margin of 91%.

* Hospitality: Occupancy at Westin Goregaon was stable at 82%. ARR rose 8% YoY to ~INR12,630. Hence, revenue was up 9% YoY to INR438m. EBITDA margin dropped to 37%, leading to EBITDA of INR163m.

Key management commentary

* Launches: The Pokhran Road project in Thane was launched in Oct’24 and witnessed an encouraging response. Additionally, OBER has available launch pipeline at Borivali (1 tower) and Goregaon (2 towers), which might be launched in 2HFY25 or FY26. The Gurugram, Adarsh Nagar, Worli and Tardeo projects will be launched in FY26.

* Annuity portfolio: The company is witnessing strong leasing traction across all three office assets, and they can be fully leased out by the end of FY25. OBER is also hopeful to achieve ~90% occupancy in the Borivali mall by the end of FY25 once it is operational by mid Jan-25.

* Glaxo land, Worli: The project has a development potential of 1.6-1.8msf carpet area, and the management has decided to build a mixed-use annuity project, which would include 0.6msf of mall, a boutique hotel of ~80-100k sqft, and ~1msf for office development. Work on the project will start in 1QFY26 and approvals will take another nine months from there.

* Funds raised (INR60b) will be utilized to accelerate growth by acquiring land parcels, which is expected in the next 4-6 months as the company is evaluating some opportunities.

* For NCR, OBER has completed the design and it is now at the approval stage; planning to launch the project by 2HFY26.

* The company was declared successful resolution applicant by NCLT for the acquisition of Nirmal Lifestyle Realty Pvt. Ltd. It has development rights for land measuring ~20,262.40 sqm situated at L.B.S. Road, Mulund West, Mumbai.

* The company entered into an agreement for the redevelopment of land measuring ~2,576 sqm situated at Carter Road, Bandra.

Valuation and view

* OBER is witnessing an uptick in the performance of its residential business. It is also seeing an uptrend in its rental portfolio as it commences operations at its ongoing marquee office and retail assets. The recent Pokhran-2 launch in Thane received strong traction; hence, we believe the residential segment should see a healthy scale-up, with the available pipeline across the MMR and Gurugram regions.

* We expect OBER to post a 41% CAGR in pre-sales over FY24-27. However, a major part of the re-rating depends on re-investment of strong cash flow generation as the company monetizes its completed and near-completion inventories.

* We have accelerated the sales velocity for 360 West, Thane’s Pokhran2 and Elysian as these projects witnessed strong traction. Additionally, after OC, Enigma too witnessed improved velocity, hence we have fast-tracked it.

* At current valuations, OBER’s residential business implies a value of INR550- 570b. The estimated value of the existing pipeline, including the Gurugram project, is INR300b, implying +100% of the going concern premium, which already accounts for prospective business development in the near term.

* Reiterate Neutral with a TP of INR2,056, indicating a 3% upside potential.

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