22 August 2016
1QFY17 Results Update | Sector: Real Estate
Oberoi Realty
Buy
BSE SENSEX
28,077
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
8,667
OBER IN
339.3
98.9 / 1.6
316 / 209
-2/13/15
66.0
27.5
CMP: INR298
TP: INR352(+18%)
Operationally strong quarter, led by bookings in Three Sixty West
Strong P&L:
Revenue grew 52% YoY to INR3.2b, EBITDA grew 30% YoY to
INR1.7b, and PAT grew 30% YoY to INR1.1b. EBITDA margin shrank 9pp YoY but
expanded 6pp QoQ to 52%. The P&L strength is attributable to strong revenue
recognition from
Esquire
in 1QFY17. Rental income was down 1.3% QoQ/YoY to
INR0.7b, led by decline in rentals from
Westin.
Average monthly rental per
square foot from
Commerz II
Phase-I increased from INR117 in 4QFY16 to
INR122.
Three Sixty West boosts presales:
Presales were strong at 0.15msf (INR4.1b)
on bookings in
Three Sixty West
(58%), Borivli project (11%),
Exquisite
(10%),
Prisma
(9%), and
Esquire
(4%).
Collections down; gearing near zero:
Collections declined 26% YoY (and 36%
QoQ) to INR2.4b. Net debt went up by INR0.6b QoQ to INR2.7b (0.05x).
Financials & Valuations (INR b)
2016 2017E 2018E
Y/E Mar
Net Sales
14.1
19.5
33.9
EBITDA
6.7
9.1
20.1
Adj PAT
4.3
5.8
13.1
Adj EPS (INR)
13.0
17.8
39.9
EPS Growth (%)
34.3
36.8 124.7
BV/Share (INR) 156.3 170.0 203.9
RoE (%)
8.6
10.5
20.6
RoCE (%)
7.4
9.4
18.4
Payout (%)
18.6
20.4
12.1
P/E (x)
22.5
16.4
7.3
P/BV (x)
1.9
1.7
1.4
EV/EBITDA (x)
14.8
9.2
4.1
Preferred Mumbai play, Buy:
Despite a sluggish market, OBER’s new operating
cycle has been strong, with the success of
Three Sixty West
and its Borivli project.
This speaks volumes about the company’s brand equity, product attractiveness,
and cash flow strength. We maintain our positive bias on the stock. It trades at
16.8x FY17E EPS, 1.8x FY17E BV, and at an 18% discount to NAV of INR352.
Maintain
Buy;
OBER is our preferred Mumbai play.
Estimate change
TP change
Rating change
Aashumi Mehta
(Aashumi.Mehta@MotilalOswal.com); +91 22 6129 1537
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.

Oberoi Realty
Exhibit 1: EBITDA margins (%) improved QoQ
1QFY15
90
70
50
30
10
Overall Annuity (incl Hotel)
Hotel
Dev Co
Source: Company, MOSL
(8.7)
(7.4)
(4.5) (4.7)
2QFY16
2QFY15
3QFY16
3QFY15
4QFY16
4QFY15
1QFY17
1QFY16
Exhibit 2: Net debt stood at INR2.7b, up INR0.6 b QoQ
6.0
7.4 7.1
6.1
2.1 3.0 2.1 2.7
Source: Company, MOSL
Exhibit 3:
Annuity income down 1.3%QoQ (INR m)
Exhibit 4:
Asset wise break up of annuity income (INR m)
Oberoi Mall (INR m)
Commerz (INR m)
Westin (INR m)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 5:
Strong pre-sales led by three sixty west
Sales value (INR b)
12.3
17.7
Exhibit 6:
Collections reduced as well (INR m)
3.0
2.1 2.2 2.2 2.2
0.9 0.8 0.6 1.1 1.4 1.0
1.7 1.4
4.06
2.65
Source: Company, MOSL
Source: Company, MOSL
22 August 2016
2

Oberoi Realty
Valuation and views
Management’s strategy to monetize assets, till it recovers cost and then holding
the balance inventories to maximize profitability, has resulted into matured
unsold inventories in place viz. Commerz II, Oasis (Worli), and Exquisite.
New launches has led to to increase in presales/collections (up ~53% in FY16 v/s
FY15) while RoE/RoCE stood at 8.6%/11.4% vs~20% in FY11. Nonetheless, with
economic sentiment turning positive, it placed the company well prepared for
up-cycle with ready assets and accumulated benefits.
New operating cycle starting with huge success of Mulund, JVLR and Borvali
projects (in CY15) speak volumes on company’s brand equity, product
attractiveness and strength of cash flow in forthcoming period.
Despite, weak Mumbai market, we maintain our positive bias on the stock due
to visibility of sustenance of improving cash flows and P&L (RoE/RoCE of
15%/21% by FY17 v/s 8.6%/11.4% now).
Despite a sluggish market, OBER’s new operating cycle has been strong, with the
success of
Three Sixty West
and its Borivli project. This speaks volumes about
the company’s brand equity, product attractiveness, and cash flow strength. We
maintain our positive bias on the stock. It trades at 16.8x FY17E EPS, 1.8x FY17E
BV, and at an 18% discount to NAV of INR352. Maintain
Buy;
OBER is our
preferred Mumbai play.
Key triggers
Success in Worli launch and improvement in operating cash flow
Improvement in Mumbai realty market dynamics providing demand impetus
Key risk factors
Delay in incremental leasing at Commerz II
Regulatory uncertainties on account of DP Plan
Delay in new launches
Exhibit 8:
Project
-wise value contribution (%)
Exquisite,
10%
Esquire , 4%
Three sixty
west, 58%
Enigma, 6%
Exhibit 7: We estimate OBER’s NAV at INR337/share
Particulars
INR m
INR/sh
% GAV
Dev Co
Commercial
Retail
Hotel
Gross Asset Value
Net Cash
(-) Other Op Exp
(-) Tax
Net Asset Value
142,430
31,170
14,210
8,006
195,816
-2,133
15,665
58,745
119,273
420
92
42
24
577
-6
46
173
352
73
16
7
4
100
-1
8
30
61
Prisma, 9%
Sky City,
11%
Source: MOSL, Company
Source: MOSL, Company
22 August 2016
3

Oberoi Realty
Story in charts
Exhibit 9:
Commerz
II leasing key levers to rentals (INR b)
4.3
3.3
2.1
2.2
2.5
2.6
2.7
18
9
0.7
FY11
Source: Company, MOSL
10
0.7
FY12
9
4
0.5
FY13
0.2
FY14
1.0
FY15
1.5
1.5
1.1
Exhibit 10:
New
operating cycle to trigger presales and CF
Presales (msf)
Presales (INR b)
27
28
26
1.8
0.7
0.8
FY16E FY17E FY18E
Source: Company, MOSL
Exhibit 11: Leveraging of balance sheet on new land
acquisition (INR b)
6.1
2.1
Exhibit 12: Re-leveraging and new launch should improve
return ratios (%)
27.6
18.6
22.7
17.9
18.9
27.6
27.7
19.9
19.9
13.1 12.8
13.1
12.8
7.2
7.3
6.3
7.0
7.4
9.4
RoE
RoCE
18.4
20.6
8.6 10.5
-2.3 -2.9 -1.7
-4.4
-12.9
-10.7
-4.8
-11.8
-13.1
15.9
-14.6
Source: Company, MOSL
Source: Company, MOSL
FY13
7.8
2.2
-
2.7
0.9
2.2
0.7
1.5
0.6
1.7
0.3
1.4
1.8
(0.4)
1.2
(0.6)
0.8
(1.3)
FY14
3.5
2.5
0.9
2.1
(2.2)
2.4
0.9
1.7
0.7
(1.2)
0.3
(1.5)
1.5
(3.0)
2.6
(5.0)
0.8
(5.8)
FY15
9.0
1.1
0.5
2.9
5.4
2.4
0.8
1.6
0.9
6.1
0.2
5.9
1.7
4.2
13.9
(9.5)
0.8
(10.3)
FY16
16.9
4.6
-
3.5
8.8
2.7
0.9
1.8
1.1
9.5
0.3
9.2
2.3
7.0
5.8
4.8
0.8
4.0
FY17E
25.4
8.7
3.0
2.2
17.5
3.2
1.0
2.2
1.2
18.5
1.2
17.4
4.3
13.0
4.0
9.4
1.2
8.2
FY18E
20.0
10.3
11.9
-
21.5
4.2
1.3
2.9
1.3
23.1
1.3
21.8
6.7
15.1
5.0
10.5
1.6
8.9
Exhibit 13: Cash flow to improve gradually (INR b)
Oberoi cash flows to
improve when benefits of
matured assets and new
launches are accrued
Cash flow from sales
Dev Co (Ex Worli)
Construction (Ex Worli)
Worli inflow
Worli outflow
Dev Co
Rental
Opex
Rent Co
Admin
Operating surplus
Capex construction
Cash EBITDA
Tax expense
Core OCF
Fungible FSI
FCFE
Dividend
Net Surplus from core operation
22 August 2016
4

Oberoi Realty
Exhibit 14: Operating metrics
Annuity portfolio performance
Occupancy
EBITDA Margin
Rental/sf/month
Oberoi Mall (INR m)
Occupancy
EBITDA Margin
Rental/sf/month
Commerz (INR m)
Occupancy
EBITDA Margin
ARR (INR/day)
Westin (INR m)
Total rental income
EBITDA Margin (%)
Overall
Annuity (incl Hotel)
Hotel
Dev Co
Development Business
Sales volume (msf)
Sales value (INR b)
Average realization (INR/sf)
Collection (INR m)
Operating cash flow (INR m)
Construction
Splendor
Exquisite
Grande
Priviera
Esquire
Revenue booking
Priviera
Splendor
Exquisite
Grande
Rental
Total
-
-
1.0
-
0.6
1.8
-
0.0
1.1
-
0.6
1.9
0.7
2.2
0.7
3.4
0.7
2.1
0.7
1.9
0.7
7.8
0.7
2.3
0.7
3.2
1.3
1.6
1.2
0.9
0.3
0.4
0.4
100%
96%
100%
43%
0%
100%
98%
100%
43%
0%
100%
99%
100%
69%
0%
100%
100%
100%
100%
0%
100%
100%
100%
100%
0%
100%
100%
100%
100%
0%
100%
100%
100%
100%
39%
100%
100%
100%
100%
43%
100%
100%
100%
100%
53%
0.07
1.4
20,058
1,411
(343)
0.04
0.99
23,947
1,909
(1,224)
0.15
2.95
19,952
1,531
726
0.78
12.31
15,868
4,762
1,977
0.08
1.71
21,178
3,203
2,158
0.06
1.41
22,478
2,574
732
1.02
17.74
17,328
5,245
(728)
0.14
2.65
18,629
3,688
2,104
0.15
4.06
27,601
2,374
(356)
55.3
60.5
13.0
68.2
60.3
66.2
27.7
75.6
58.3
65.7
31.3
72.8
51.8
65.8
36.4
58.1
60.6
66.1
31.9
74.2
57.6
65.6
31.1
71.5
41.9
64.8
32.6
45.0
45.5
63.5
34.1
55.1
52.1
64.6
29.2
60.3
1QFY15
99%
96%
140
229
86%
100%
130
122
77.3%
13.0%
7,747
272
623
2QFY15
100%
97%
142
235
84%
100%
129
118
77.9%
27.7%
8,025
290
643
3QFY15
100%
96%
146
241
83%
100%
128
116
76.9%
31.3%
8,953
329
687
4QFY15
99%
96%
143
235
83%
100%
128
116
81.9%
36.4%
8,908
334
691
1QFY16
99%
95%
145
239
83%
100%
132
120
78.7%
31.9%
8,161
308
684
2QFY16
100%
96%
140
232
95%
100%
128
117
77.5%
31.1%
8,425
306
671
3QFY16
99%
95%
148
243
97%
100%
127
117
76.2%
32.6%
9,079
340
717
4QFY16
99%
94%
138
228
88%
99%
132
112
77.5%
34.1%
9,041
326
694
1QFY17
91%
93%
161.76
244
88%
99%
140.68
119
77.3%
29.2%
8,166
287
684
Source: MOSL, Company
22 August 2016
5

Oberoi Realty
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Construction exp.
Staff Cost
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Adjusted PAT
Change (%)
2011
9,960
27.1
3,920
270
5,770
57.9
237
2
627
6,159
983
16.0
5,172
12.9
2012
8,247
(17.2)
3,083
329
4,835
58.6
269
3
1,501
6,063
1,430
23.6
4,629
(10.5)
2013
10,476
27.0
3,972
383
6,121
58.4
285
4
999
6,831
1,783
26.1
5,048
9.1
2014
7,985
(23.8)
3,194
442
4,348
54.5
272
3
571
4,644
1,533
33.0
3,111
(38.4)
2015
9,227
15.6
3,562
527
5,138
55.7
403
18
175
4,892
1,721
35.2
3,171
1.9
2016
14,081
52.6
6,873
533
6,674
47.4
490
2
362
6,545
2,285
34.9
4,260
34.3
2017E
19,501
38.5
9,786
586
9,129
46.8
500
147
350
8,832
3,003
34.0
5,829
36.8
(INR Million)
2018E
33,935
74.0
13,182
645
20,108
59.3
501
161
400
19,846
6,748
34.0
13,098
124.7
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Debtors
Cash & Bank Balance
Loans & Advances
Current Liab. & Prov.
Creditors
Provisions
Net Current Assets
Misc. Expenses
Application of Funds
E: MOSL Estimates
2011
3,282
29,834
33,476
-
33,476
7,996
415
7,581
1,728
650
29,947
7,906
468
13,990
7,583
6,438
6,029
410
23,508
-
33,476
2012
3,282
34,059
37,342
-
37,420
7,687
678
7,009
2,841
-
35,342
10,360
679
12,934
11,368
10,426
9,642
783
24,916
-
37,420
2013
3,282
38,339
41,621
-
41,769
7,796
929
6,867
3,848
0
39,522
12,580
522
10,725
15,695
11,121
10,331
790
28,400
-
41,769
2014
3,282
40,682
43,964
761
44,944
7,849
1,192
6,658
4,337
496
40,805
16,545
862
5,078
18,321
10,007
9,138
869
30,799
-
44,944
2015
3,282
43,061
46,343
9,061
55,646
11,743
1,595
10,148
218
0
58,180
34,853
828
2,937
19,562
15,554
14,713
841
42,627
-
55,646
2016
3,393
49,650
53,043
6,086
59,357
8,225
2,085
6,140
-
744
63,889
39,573
1,170
3,209
19,938
18,240
18,197
44
45,649
-
59,357
2017E
3,393
54,288
57,681
8,570
66,480
8,225
2,294
5,932
945
-
76,495
35,422
1,229
20,344
19,501
19,547
19,501
46
56,949
-
66,480
(INR Million)
2018E
3,393
65,799
69,192
7,499
76,919
8,225
2,523
5,702
2,256
-
95,200
47,893
1,290
20,565
25,451
28,893
28,845
48
66,307
-
76,919
22 August 2016
6

Oberoi Realty
Financials and Valuations
Ratios
Y/E March
Basic (INR)
Adjusted EPS
Growth (%)
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios
Debtors (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2011
15.8
12.9
16.5
102.0
1.0
7.3
2012
14.1
(10.5)
14.9
113.8
2.0
16.6
2013
15.4
9.1
16.2
126.8
2.0
15.2
2014
9.5
(38.4)
10.3
133.9
2.0
24.7
2015
9.7
1.9
10.9
141.2
2.0
24.2
2016
13.0
34.3
14.5
156.3
2.0
18.6
2017E
17.8
36.8
19.3
170.0
3.0
20.4
2018E
39.9
124.7
41.4
203.9
4.0
12.1
19.4
18.3
14.2
8.3
2.4
0.7
31.4
28.9
21.5
11.7
2.2
0.7
30.8
27.4
20.2
11.3
2.1
0.7
23.0
20.6
15.1
7.2
1.9
0.7
16.8
15.5
9.4
4.4
1.8
1.0
7.5
7.2
4.2
2.5
1.5
1.3
19.9
19.9
35.5
17
0.3
13.1
13.1
18.0
30
0.2
12.8
12.8
17.7
18
0.3
7.3
7.2
8.8
39
0.2
7.0
6.3
7.0
33
0.2
8.6
7.4
7.5
30
0.2
10.5
9.4
11.3
23
0.3
20.6
18.4
26.1
14
0.4
-
-
-
0.0
0.2
0.1
0.1
0.1
Cash Flow Statement
Y/E March
PBT before Extraordinary Items
Add : Depreciation
Interest
Less : Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Less : Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2011
6,159
237
2
983
3,474
1,936
(1,364)
572
140
(1,224)
10,037
-
2
377
9,658
10,359
3,631
13,990
2012
6,059
269
3
1,430
2,464
2,438
(3,458)
(1,020)
650
(2,808)
92
-
3
768
(679)
(1,056)
13,990
12,934
2013
6,831
285
4
1,783
5,694
(357)
(1,116)
(1,473)
(0)
(1,116)
69
-
4
768
(703)
(2,209)
12,934
10,725
2014
4,644
272
3
1,533
8,045
(4,660)
(543)
(5,203)
(496)
(1,039)
72
761
3
768
62
(5,647)
10,725
5,078
2015
4,892
403
18
1,721
13,969
(10,377)
226
(10,151)
496
722
(1)
8,300
18
768
7,513
(2,141)
5,078
2,937
2016
6,545
490
2
2,285
2,751
2,001
3,735
5,736
(744)
2,991
3,220
(2,975)
2
794
(550)
4,442
2,937
7,379
2017E
8,832
500
147
3,003
(5,835)
12,021
(945)
11,076
744
(201)
(0)
2,484
147
1,191
1,146
12,965
3,209
16,174
(INR Million)
2018E
19,846
501
161
6,748
9,137
4,332
(1,311)
3,022
-
(1,311)
0
(1,071)
161
1,588
(2,819)
221
20,344
20,565
22 August 2016
7

Oberoi Realty
Corporate profile
Company description
Exhibit 1: Sensex rebased
Oberoi Realty Limited is a Mumbai-based real
estate developer. It was incorporated in May 1998
as Kingston Properties Private Ltd. ORL's primary
focus is to develop residential property but it has
diversified into retail, commercial, hospitality and
social infrastructure projects. ORL has delivered
~5msf of RE development across 35 projects so far.
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Jun-16
Promoter
DII
FII
Others
72.5
0.7
22.1
4.7
Mar-16
72.6
0.8
21.3
5.4
Jun-15
75.0
2.9
17.0
5.2
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Aranda Investments (Mauritius) Pte Ltd
SSIII Indian Investments Two Ltd
Morgan Stanley Asia (Singapore)Pte
Stichting Depositary Apg Emerging Markets
Equity Pool
Oppenheimer International Small Company
Fund
% Holding
3.7
3.3
1.6
1.5
1.4
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Vikas Oberoi
Saumil Daru
Bhaskar Kshirsagar
Designation
Chairman & Managing director
Director (Finance) & CFO
Company Secretary
Exhibit 5: Directors
Name
Anil Harish
Karamjit Singh Kalsi
Venkatesh Mysore
Name
Bindu Oberoi
Tilokchand P Ostwal
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
P Raj & Co
Type
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
17.8
39.9
Consensus
forecast
18.4
32.4
Variation
(%)
-3.4
23.0
Source: Bloomberg
Source: Capitaline
22 August 2016
8

Oberoi Realty
NOTES
22 August 2016
9

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