Q1FY24 Review: Oberoi Realty: All eyes on Thane launch in 2HFY24

2 Aug 2023 , 12:04 PM

Oberoi Realty (OBER) reported muted pre-sales but healthy collections during the quarter. The Worli project continued to disappoint, although mgmt is hopeful of an improvement in Q2FY24. Analysts of IIFL Capital Services see OBER’s pre-sales momentum to sharply improve in H2 with the expectation of launch of 2 projects in Thane in Pokaran and Kolshet. OBER’s key annuity projects, Commerz-3 and Sky City mall are expected to yield rentals FY25 onwards. OBER is also pursuing business development projects in NCR and Mumbai; analysts of IIFL Capital Services believe progress on project adds and Thane launch remain key to stock performance. Retain ADD. 

Muted Q1 pre-sales: 

OBER reported pre-sales of Rs4.8bn (down 37% YoY/ 29% QoQ) for Q1FY24. Contribution of Sky City was 44% of the overall pre-sales, Mulund at 30%, while the remaining 26% was from Elysian Goregaon. OBER sold no units at 360 West Worli during the quarter. However, collections were robust at Rs11.1bn (up 99% YoY/ 30% QoQ). Net debt decreased by Rs3.3bn QoQ to Rs27.2bn. Operating performance for annuity assets remains broadly stable, Hospitality assets witnessed a decline QoQ due to seasonality. 

Thane launch likely in Q3: 

On the call, mgmt said that the Pokaran project in Thane is likely to be launched in H2 of October (marketing activation to start in September). Civil award is in the process of being awarded. The Kolshet project (also in Thane) is in an advanced stage with the contract already awarded to L&T; however, the launch will be after Pokaran. Other key launches will include a tower in Elysian Goregaon that is likely over next 1-2 quarters. Borivali Sky City mall is expected to be given to tenants for fit-outs in Feb/Mar 2024, and the expected launch is during Diwali 2024. 

Launches and business development key; ADD: 

Analysts of IIFL Capital Services build in pre-sales of Rs56bn in FY24 (+73% YoY), driven by launches in Thane Pokaran. OBER is also pursuing a land deal in Gurgaon; also it is working on a project at Peddar Road, Tardeo and few other redevelopment projects. By FY26, OBER’s rental income is expected to scale up sharply to Rs14bn (as against Rs2.9bn for FY23), with stabilisation of Commerz-3 and Sky City mall. Re-iterate ADD with a target price of Rs1,150/share.