5 September 2019
Company Update | Sector: Real Estate
Oberoi Realty
BSE SENSEX
36,644
S&P CNX
10,848
CMP: INR514
TP: INR650 (+26% )
Set to get taller, new launch pipeline robust
Buy
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
OBER IN
364
187 / 2.6
642 / 352
-7/7/20
267
32.3
Financials Snapshot (INR b)
INR b
FY19 FY20E
Sales
25.8
24.5
EBITDA
11.6
10.8
NP
8.2
10.6
EPS (INR)
22.5
29.2
EPS Growth (%)
78.1
29.9
BV/Share (INR)
221.0
247.6
P/E (x)
22.9
17.6
P/BV (x)
2.3
2.1
EV/EBITDA (x)
15.5
17.0
EV/Sales (x)
6.9
7.5
RoE (%)
11.6
12.5
RoCE (%)
10.4
7.9
Shareholding pattern (%)
Jun-19 Mar-19
As On
Promoter
67.7
67.7
DII
3.9
4.4
FII
26.1
25.4
Others
2.4
2.5
FII Includes depository receipts
Stock Performance (1-year)
Oberoi Realty
Sensex - Rebased
680
600
520
440
360
FY21E
31.3
15.4
11.7
32.2
10.3
276.5
16.0
1.9
11.9
5.8
12.3
10.1
We interacted with Oberoi Realty’s (OBER) senior management to understand the
progress on the execution of its projects, launch pipeline and the ongoing trends in the
industry.
OBER is set to launch the following two new projects around Diwali this year.
Encouragingly, these projects will likely help the company to double its volumes in
FY20, in our view.
Thane: The company has completed land acquisition at Thane (INR8.9b,
including approval costs for 60 acre land parcel) with development potential
of ~10-12msf. Of this, ~2.5msf is likely to be allocated to the affordable
housing (AFH) category, which will be eligible for tax benefits u/s 80IB
provided it receives the necessary approvals before Sep’19. Management is
confident about obtaining these approvals within the stipulated timeline.
Goregaon: Exquisite III (1.8msf) project is scheduled for roll out by Oct’19.
Companies such as OBER stand to benefit from Thane’s relatively strong appetite
for brands. Notably, this region clocked sales of ~35msf in CY18 compared to
~27msf in Mumbai. Also, Thane offers a unique value proposition and the new
project launches there will likely substantially boost the sales velocity.
OBER is also set to enter the next leg of growth in the leasing segment with the
planned commencement of operations in Borivali (Oct’20) and Worli (Oct’21)
malls, and Commerz III (Mar’21). We expect annuity portfolio CAGR of 47% to
INR14.4b over FY19-23 for OBER once these malls are fully operational.
Against this promising backdrop, we reiterate our Buy rating and derive an SOTP-
based target price of INR650.
Residential biz prospects boosted by strong new launch pipeline
OBER has completed the Thane land acquisition by paying INR8.9b to GSK for a
60-acre land parcel with development potential of 10-12msf. According to
management, 20-25% of the developable area will be allocated for affordable
housing (AFH). To be eligible for the AFH tax benefits, approvals will have to be
received by Sep’19 and management is confident about obtaining the same. The
first phase of the project is scheduled for launch around Diwali this year (end-
Oct) – it will more likely be under AFH with a ticket size of INR12-15m. We
expect good response to the project based on our catchment analysis (detailed
Thane; Pokhran Road analysis in the report).
Also, Exquisite III (Goregaon)
project is likely to be rolled out close to Diwali. We visited this project site and
noted that construction work has already begun on five towers. We expect
Thane and Goregaon launches to substantially boost volumes velocity to
~1.6msf in FY20, double of 0.8msf in the previous year.
Budget 2019 - alignment of the definition for AFH under 80-IBA and GST tax laws: It is
proposed to increase the limit of carpet area from 30 sqm to 60 sqm in metropolitan
regions and from 60 sqm to 90 sqm in non-metropolitan regions. It is also proposed
to provide the limit on cost of the house at INR4.5m in line with the definition in the
GST Acts. This is applicable for projects approved on or after September 1, 2019.
Jun-18
67.7
3.4
26.4
2.5
Chintan Modi – Research Analyst
(Chintan.Modi@Motilaloswal.com); +91 22 6129 1554
Alpesh Thacker – Research Analyst
(Alpesh.Thacker@MotilalOswal.com); +91 22 5036 2561
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.