Oberoi Realty - Correction overdone; downside limited - Motilal Oswal

Esquire IOD a key positive, though some issues still elusive; Buy

Oberoi Realty (OBER) has underperformed the Sensex by 24% and BSE Realty Index by 12% since April 2013. Despite approval hassles and operational delays, we believe the correction is overdone and offers smart entry points for medium-term horizon.

- OBER's long stalled project, Esquire (Goregaon) has received IOD and construction work should resume by July 2013, reviving sales velocity and customer collections.

- A few other operational headwinds viz. MoEF approval in Mulund project, weak leasing at Commerz II, delay in launches continue to remain elusive, albeit the management has shown conviction over resolution in FY14-15, with a potential favorable Supreme Court Verdict on Mulund MoEF by July 2013.

- Success on operational improvement hinges on new launches with potential to augment operational cash flow significantly in FY15. At the current valuations of 8.4x FY15E EPS (v/s historical average of 15x) and 1.3x FY15E BV (v/s historical average of 2x), we reiterate Buy. Our target price of INR290 implies 37% upside.

Source : Equity Bulls

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