Maintain BUY on Oberoi Realty - Blockbuster quarter - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

Carrying forward the momentum in residential real estate from previous quarter, Oberoi Realty (ORL) registered pre-sales volume of ~1.1msf (8.3x/2.1x YoY/QoQ) in 4QFY21. Booking value also jumped to INR 19.6bn during the quarter (vs INR 2.3/9.7bn in 4QFY20/3QFY21). However, collections dipped sequentially to INR 6.4bn from INR 7.4bn in 3QFY21. Notwithstanding the near washout of April/May, we expect ORL to deliver strong sales in FY22 as project/phase launches in Borivali, Goregaon and Thane remain on track. Board passed an enabling resolution to raise up to INR 35bn through NCD/equity-instruments. We maintain BUY on ORL with target price of INR 692/sh (vs INR 697/Sh), as it is better placed to take advantage of the sectoral tailwinds. We increase our FY22 EPS estimate by 40% to account for deferment of revenue recognition in the Three Sixty West project.

4QFY21 financial highlights: ORL reported rev./EBITDA at INR 7.9/3.7bn, 7/4% beat on our est. Share of profit from JVs/associates was at INR 3.2mn vs est. of INR 3.5bn, as revenue recognition in Three Sixty West got deferred. APAT, at INR 2.9bn (+14.3% YoY, flattish QoQ), missed our est. by 53%. Excluding the JV profit from our est., APAT beat our est. by 13%. While revenue recognition for Oberoi Mall was at 73% due to straightlining of rent for the lock-in period, rent collection in FY21 was at 50% of FY20 level.

Exceptional end to a challenging year: On the back of robust bookings in 4QFY21, ORL closed FY21 with 1.7msf/INR 33bn pre-sales (0.7msf/INR 12.6bn in FY20). With launches lined up in Thane (by Sep/Oct-21), Gorgaon and Borivali, we expect an encore in FY22. Having been appointed for a society redevelopment project in Worli, ORL is setting up a team to look for more such opportunities in the MMR region. Borivali Mall and Commerz 3 are expected to be completed by Oct/Nov-22 and 2022/23 respectively. GSK Worli Mall has now been positioned as a resi. project.

Balance sheet position comfortable: Consolidated net debt stood at INR 12.6bn (vs INR 15bn on Dec-20) with net D/E at 0.14x (vs 0.17x on Dec-20). With collections of INR 16.4bn, ORL generated positive CFO of INR 7bn in FY21. Promoter holding of 67.7% and leverage at 0.14x give ORL enough room to raise capital and benefit from the sectoral tailwinds and structural shift towards organised developers.

Shares of OBEROI REALTY LTD. was last trading in BSE at Rs.551 as compared to the previous close of Rs. 526.5. The total number of shares traded during the day was 17765 in over 1079 trades.

The stock hit an intraday high of Rs. 555 and intraday low of 536.5. The net turnover during the day was Rs. 9650943.

Source : Equity Bulls

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