Q3FY24 Review: Oberoi Realty: Muted quarter; Q4 should fare better

24 Jan 2024 , 12:59 PM

Oberoi Realty (OBER) reported a weak pre-sales for Q3FY24, as the new launch in Thane clocked lower-than-expected pre-sales. Meanwhile, new tower launch at Goregaon in Jan’24 has received strong sales; implying healthy pre-sales for Q4FY24. OBER has deferred the Pokaran launch at Thane from Q4FY24 to Q2/Q3FY25. Completion of OBER’s key annuity projects — Commerz-3 and Sky City Mall — is likely in FY25 and will yield rentals of ~Rs10bn. OBER is actively pursuing business development (BD) opportunities across MMR and NCR; analysts of IIFL Capital Services believe that progress on project additions and Pokaran launch remain key to the stock performance. Retain ADD with TP of Rs1,440/share. 

Kolshet launch response subdued, drives the miss in pre-sales: 

OBER registered a pre-sales of Rs7.9bn, +25% YoY/ -18% QoQ. At Rs2.1bn, Kolshet project bookings were weak and contributed 27% of the overall pre-sales; Mulund at 26%, while 19%/16% came from Sky City/ Elysian Goregaon respectively. OBER sold 1 unit at 360 West Worli during the quarter. Collections were strong at Rs8.9bn (up 108% YoY). Calculated net debt decreased by Rs8.6bn QoQ to Rs19.7bn. Rental income grew 13% YoY, while in Hospitality, ARR’s grew 10% to Rs13,629 and occupancy was stable at 82%. 

Pokaran launch pushed out by 2-3 quarters: 

On Kolshet launch, mgmt shared that the launch has yielded learnings for the company, with Thane being a new market and also price-sensitive; mgmt expects the momentum to build up steadily. Further, OBER has pushed out its Pokaran launch by two to three quarters, from Q4FY24 to September’24. OBER is looking to start with five residential towers initially (3.5-4msf), along with the starting of a 5-star hotel and an international school. On the recently acquired Gurgaon land parcel, mgmt did not give any timeline for a launch. 

FY25 to see strong ramp-up in Annuity; retain ADD: 

On the Annuity/hospitality portfolio, mgmt expects Commerz 3 to yield Rs6-7bn annualised rentals, Rs3-3.5bn from Sky City Mall and Rs1bn from the Ritz Carlton Hotel. OBER continues to guide strong outlook for BD for FY25, further, analysts of IIFL Capital Services build-in a Pre-sale Cagr of 30% from FY23-26. Reiterate ADD with a target price of Rs1,440/share.