Q4FY23 Review: Oberoi Realty: Weak quarter; new launches critical to growth

Oberoi Realty (OBER) reported a weak Q4/FY23 with pre-sales declining 26%/17% YoY respectively. During Q4FY23, OBER completed the Worli transaction by purchasing its share of inventory from the JV and dissolving the latter. This has resulted in net debt increasing by Rs5.9bn QoQ to Rs30.5bn. FY24 is likely to see launches in Thane, which will drive strong YoY growth in presales. OBER’s key annuity projects, Commerz -3 and Skycity Mall are expected to be complete by end FY24, driving strong FY25 rental growth. Launches and news flow on business development are key to OBER’s operating and stock price performance.

Weak quarter: 

OBER reported an adjusted pre-sales of Rs5.7bn (down 26% YoY/ up 6.7% QoQ) for 4QFY23. Headline pre-sales of Rs60bn included Rs53bn of JV sales (to OBER, and by the JV partner to external customers) done before the dissolution of the same in March 2023. W.r.t performance across projects, Mulund contributed ~27% to pre-sales, while Skcyity Borivali ~23%. Three Sixty west Worli clocked in end user sales of Rs2.6bn across 3 apartments, at a price of Rs112,000/sq.ft on carpet area. OBER has effected a price increase in Goregaon projects and marginal increase in Mulund projects as well, which are nearing completion.

Thane launches likely in H2CY23: 

On the concall, management shared that it is in the final stages of designing the Thane projects at Pokaran (~15msf carpet area potential) and Kolshet (~2.5msf carpet area potential, 77% stake); and is looking to launch both the projects over the next couple of quarters. In the Pokaran project, OBER plans to do launch of a 5-Star hotel, International school and residential towers. On the Worli Glaxo land, mgmt is awaiting policy changes to take decision on the type and configuration of the project.

Annuity income to spike FY25 onwards, retain ADD: 

OBER’s Annuity and Hospitality assets performance has been broadly stable in Q4. It expects to complete Commerz-3 and SkyCity mall by end-FY24, analysts of IIFL Capital Services see rental ebitda of Rs13bn by FY26 vs Rs2.7bn in FY23. Analysts of IIFL Capital Services build in pre-sales of Rs53bn in FY24 (+65% YoY), driven by launches in Thane and phase launch in Goregaon. Approval of projects under new DCPR (like in Thane) will allow higher FSI, will have a positive impact on OBER’s NAV. Retain ADD.