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Last Updated : Mar 10, 2019 09:34 AM IST | Source: Moneycontrol.com

Buy Oberoi Realty, target Rs 539: Anand Rathi

With strong launches planned in FY20E and Borivali project expected to drive sales momentum, we continue to remain positive on the company over medium to longer term perspective.

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Anand Rathi

Oberoi Realty reported a growth of 48.4 percent in its consolidated revenue at Rs 5,286 million in Q3-FY19 as against Rs 3562 million in Q3-FY18. Real estate segment revenue came in at Rs 4917 million registering a growth of 53.3 percent Y-o-Y whereas hospitality segment revenue registered a growth of 4.2 percent Y-o-Y at Rs 3692 million in Q3-FY19.

On profitability front, the company has reported operating margins of 35.6 percent at Rs 1881 million in Q3-FY19. The company’s profit after tax for the quarter stood at Rs.1379 million in Q3-FY19 registering a growth of 14 percent Y-o-Y.

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The company achieved its FY19E full year base-target of 100-120 units at Esquire with sales of 102 units in 9MFY19. It will further look to incrementally sell 18 apartments to achieve its upper-end target of 120 apartments in FY19E. Also, it clocked strong sales momentum at Borivali (75,195 sq ft) project. It also commenced bookings for a fifth tower at Sky City and received a good response to the project in Q3FY19. However, tepid sales at Goregaon projects (31,555 sq ft) and no sales at Worli project were also witnessed during the quarter.

On the new launches front, the company has postponed the launch of the Goregaon Phase-III near the festive season in Q2FY20E whereas the Thane project would be probably launched in Q3FY20E. It could also launch Maxima project in FY20E.

The company have commenced bookings for the fifth tower at Sky City in Q3FY19, which received a strong response during the quarter. With overall bookings achieved at this project in Q3FY19 (51 units on 75,195 sq ft), the company have crossed 1000 units sales in the project.

The company has planned two mixed-use developments at Borivali (Gross Leasable Area: 1.73 msf) and Worli (Gross Leasable Area: 1.70 msf). On this front, it has already incurred a capex of Rs. 40-50 crore. At Borivali, it shall develop 1.2 msf mall, 0.3-0.4 msf hotel and remainder office space. In contrast, at Worli, it will develop 0.9-1.0 msf mall, 80-90 room hotel while rest would be for office space. These assets, which would be developed at an expenditure of Rs.800 crore each, are expected to be operational in the next four to five years.

Three Sixty West project is in advanced stage of completion of construction work with the remaining construction left being a slab, lobby and common area. Revenue recognition from the project will start once the company achieves 25 percent sales threshold. The company will apply for occupancy certificate for the project in H1CY2019 and start giving possession to buyers in Q1FY20E. Also, it would be ready to move in by Q4FY20E.

Furthermore, Commerz II has achieved 100% occupancy in Q3FY19. The company would start receiving rental income from March, 2019. Commerz II clocked an average rental of Rs 141 psf per month in Q3FY19. Also, along with these assets, the upcoming mixed-use development projects & Commerz-III (1.7 msf) will significantly drive rental income, going ahead.

Overall, with strong launches planned in FY20E and Borivali project expected to drive sales momentum, we continue to remain positive on the company over medium to longer term perspective.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Mar 10, 2019 09:27 am
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