Embassy REIT (EOP) reported a broadly stable Q3FY24 distribution, in line with the full year guidance. Blended occupancy inched up higher QoQ. Gross leasing was the highest ever for any quarter, driven by strong pre-leasing demand for Bangalore under-constructions projects. ~70% of near term under construction projects are now pre-leased. Further, EOP is denotifying fully vacant SEZ buildings of ~1.1msf into non SEZ and another 1.1msf of floors are being demarcated for conversion based on recently notified rules. Analysts of IIFL Securities expect meaningful DPU growth in FY26; expect 6.1/7.4% yield over FY25/26 and retain BUY rating with ₹395/unit, implying 8% upside.
Stable distribution; occupancy inches higher:
EOP reported distribution of ₹5.2/unit (down 2% YoY), even as NOI was up ~8% YoY, largely due to higher interest costs and working capital changes. For 9MFY24, distribution came in Rs16.1/unit (flat YoY), in-line with FY24 guidance of Rs20.5-22/unit (IIFL ₹21/unit). Blended Occupancy improved marginally QoQ to 84% (vs 83% QoQ) with new leasing of 1msf. Fresh expiries increased for FY24 by 0.4msf. Hospitality portfolio (1,096 keys) performance improved with blended occupancy up 8ppt YoY, ADR up 19% YoY and Ebitda up 62% YoY.
Highest ever quarterly gross leasing:
Gross leasing trends were encouraging with 3.5msf for Q3FY24, which included 2.2msf of preleasing for under-construction projects at Manayta and Techvillage. Global Captives (GCCs) took up 78% of gross leasing for the quarter, largely in the BFSI and retail space. Further, mgmt has guided to a pipeline of 1.5msf across Bangalore markets along with some recovery in demand in the Pune and Noida markets as well. ~1.1msf of fully vacant SEZ buildings across Bangalore and Pune are awaiting de-notification.
Favourable changes to SEZ area to bode well for occupancy; BUY:
Mgmt shared that EOP has demarcated 1.1msf of SEZ area for conversion into non-SEZ, of which 0.6msf is in Manyata, while others are largely on a test case basis. EOP will continue to demarcate more SEZ areas based on demand visibility. Analysts of IIFL Securities expect leasing to improve steadily, with occupancy to attain pre-covid levels by FY26/27. Re-iterate BUY.
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Securities Support WhatsApp Number
+91 9892691696
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.