Oberoi Realty - Impressive Sales performance - Prabhudas Lilladher

* Results above estimates: Oberoi Realty declared results above ours as well as consensus estimates driven by a combination of better-than-expected sales along with higher execution at a few of their projects. Revenues grew by 35% QoQ to Rs2,548m; however, slightly down by 4.5% YoY on account of lower contribution from the completed project 'Splendor' during the quarter. Boosted by higher realizations in the residential segment, reported EBITDA margins stood at 64.5%, the highest recorded in any quarter so far, an increase of 360bps QoQ and 1020bps YoY. Consequently, PAT increased by 5% YoY and 38.5% QoQ to Rs1,436m.

* Absorption increases despite sharp realization uptick: During the quarter, Oberoi delivered an impressive sales performance, clocking sales to the tune of Rs2,789m, an increase of 57% QoQ, on the back of 42% increase in volumes (@ 0.176 msf) along with 10.5% increase in blended realizations. Despite 11.3% QoQ hike in prices at 'Esquire', Oberoi was able to sell ~10% higher volumes at this project reaffirming the location strength of Oberoi's land parcels. Healthy absorption at existing projects at Goregaon augurs well in terms of visibility of future pipeline of projects as the company has ~3.76 msf monetizable residential area at this location. In addition, increased construction progress at 'Splendor Grande' drove realizations higher by 5.4% QoQ at the project, post an already steep 10.6% hike seen in Q3FY12.

* Key concall highlights: 1> State government has applied for environment clearance with the MOEF for the Mulund land and thus, management expects to launch the first phase of Mulund project by Q2FY13 2> Oasis Worli is expected to be launched soon, company has advanced an additional Rs1.8bn to slum rehab partner in lieu of an expected hike in FSI 3> Last phase of Goregaon residential project is expected to start construction by the end of FY13 4> Commerz II phase 1 is expected to be completed by September 2012, management has indicated a surge in inquiries for commercial space at Goregaon (~2 msf of lease inquiries in Goregaon commercial market).

* Valuation and outlook: We retain our positive stance on the stock, given Oberoi's high visibility premium land bank, coupled with a strong balance sheet. We see multiple triggers ahead for the stock in the form of Mulund and Worli project launches In FY13 along with possible value accretive land acquisitions ahead. Our SOTP based target price stands at Rs309. We maintain Accumulate.

Source : Equity Bulls

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