Oberoi Realty surges to record high as brokerages raise target prices on robust Q4 results

In the last one year, Oberoi Realty stock has surged over 70 percent, outperforming benchmark Nifty 50 which as risen 21 percent during this period.

Shares of Oberoi Realty soared nearly 5 percent, reaching a new peak of Rs 1,657 on the National Stock Exchange (NSE) on May 16. This significant uptick, building on previous session gains, follows positive investor sentiment as brokerages revise target prices upwards. The revision is attributed to the expanding annuity portfolio, favorable project launches, and optimistic outlook on inventory liquidation.

The Mumbai-based real estate developer reported a remarkable 64 percent surge in net profit, reaching an all-time high of Rs 788 crore for the quarter ending March 2024. This growth was driven by robust demand and operational performance. Additionally, the company witnessed a year-on-year revenue increase of 37 percent to Rs 1,315 crore for the quarter under review.

According to Motilal Oswal analysts, Oberoi Realty's near-term launch pipeline remains strong and the company is estimated to report a 41 percent CAGR in bookings over FY24-26 to Rs 7,900 crore.

Follow our market blog to catch all the live action

The brokerage believes that its completed projects such as Sky City Phase 1, 360-West and Eternia Enigma have the potential to cumulatively generate over Rs 1,500 crore of surplus cash annually.

"This, coupled with the scale-up in rental income, provides enough firepower to capture the business development opportunity. t current valuations, Oberoi Realty’s residential business implies a value of Rs 36,000-37,000 crore," Motilal Oswal said.

The estimated value of the existing pipeline, including the Gurugram project, is Rs 2,3000 crore, implying 50-60 percent of the going concern premium, which already accounts for prospective business development in the near term, the brokerage added.

Motilal Oswal reiterated the 'Neutral' call on Oberoi Realty stock, saying, "We roll forward their estimates and incorporate contribution from the new Worli project, resulting in an increased target price of Rs 1,435".

Oberoi Realty recently agreed to the redevelopment of a land parcel in Worli, Mumbai. Nuvama Institutional Equities estimates the company to be able to generate pre-sales of Rs 6,400 crore from this project.

"Through this deal, the company is tapping the significant redevelopment opportunity in Mumbai and also addressing concerns about the pace of business development," it said.

According to Nuvama analysts, Oberoi Realty's strong brand, access to quality land bank, healthy balance sheet, robust (and growing) annuity portfolio and revival of housing demand in the Mumbai market are key positives for the stock.

In addition, new launches shall spur sales growth, going ahead, and the annuity portfolio’s cash flow trajectory shall improve over long term.

Also Read | Oberoi Realty stock surges to record high on stellar Q4 results, fundraise plans

The brokerage believes that the rate of liquidation of inventory in ongoing projects and the response to the launch of the Thane project are the key triggers for the stock.

"We continue to follow the old accounting standards; our cash flow-based valuation remains unchanged," it said as it maintained a hold rating on the stock with a raised target price of Rs 1,670 (40 percent premium to Q4FY26E NAV of Rs 1,193).

At 9:45 am, Oberoi Realty shares were trading 5.5 percent higher at Rs 1,661.50 on NSE. In the last one year, the stock has surged over 70 percent, outperforming benchmark Nifty 50 which as risen 21 percent during this period.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.