21 July 2014
1QFY15 Results Update | Sector:
Real Estate
Oberoi Realty
BSE SENSEX
25,642
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,664
OBER IN
328.2
78.8/1.3
276/154
-8/-7/-6
CMP: INR240
TP: INR297
Buy
Financials & Valuation (INR m)
Y/E Mar
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr. (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2015E 2016E 2017E
11,584 19,388 28,610
6,297 11,071 16,687
3,979
12.1
27.9
8.7
11.4
19.8
1.7
6,962 10,969
21.2
75.0
162.6
13.8
17.8
11.3
1.5
33.4
57.6
192.5
18.8
24.7
7.2
1.2
BV/Sh. INR 143.7
Revenue below estimates, margin in line:
Oberoi Realty (OBER)’s 1QFY15 revenue
de-grew 19.7% YoY (-20% QoQ) to INR1.8b (v/s est. of INR2.1b). EBITDA de-grew
27% YoY (-23% QoQ) to INR0.97b (v/s est of INR1.2b), translating into margin of
55% (-2pp QoQ). Residential revenue was entirely contributed by Exquisite. Lower
revenue trickled down to PAT, which de-grew 37% YoY to INR643m, led by higher
depreciation (impact of schedule 11 of companies act) and lower other income.
Seasonally weaker hotel operations dent annuity business:
Annuity revenue was
down 3% QoQ (grew 6% YoY) on account of seasonally weaker contribution from
hotel operations (-10% QoQ). QoQ weakness in margin was also attributable to ~
INR40mof prior period property tax provision in hotel operations, which dent its
margin to 13% in 1QFY15 (v/s 33.4% in 4QFY14 and 30.8% in 1QFY14).
Presales improve QoQ:
Presales was at 0.07msf (INR1.4b) v/s 0.05msf (INR1.1b) in
4Q and est of INR1b. Blended realization declined QoQ 15% (+6% YoY) to
INR20,058/sf. Entire presales was accounted by Exquisite and Esquire.
Collections up QoQ, Payment on Borivali land led net FCFE –ve of INR10.8b:
Broadly, we calculate, inflow of INR1.9b in 1QFY15 including (a) INR1.4b
collections (v/s INR1b in 4QFY14), and (b) INR0.4b rentals EBITDA. These were
largely spent in ~INR2b in ongoing constructions/capex, (b) INR10.2b of balance
payment to Borivali deal, and (c) tax & admin of INR0.4b. Consequently net FCFE is
–ve at INR10.8, leading to net debt of INR6b (net DER of 0.13x) on B/S (v/s net
cash of INR4.7b in 4QFY14).
Operations near bottom, overhangs diluted, maintain Buy:
Key overhangs viz.
Mulund MoEF, Worli hotel operator, JVLR project conversion approval, and new
land acquisition (at Borivali) etc was addressed to a meaningful extent. It should
pave the way for a new monetization cycle and better cash flows 2HFY15 onwards.
Seamless execution over last 2 years should benefit its cash flow with ready assets
once demand turns favorable in Mumbai. It trades at 11.3x FY16E EPS, 1.5x FY16E
BV.
Buy
with a target price of INR297. Await further clarity in concall scheduled at
4 PM July 21, 2014. DIAL IN +91 22 3960 0645/+91 22 6746 5845.
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.