Buy Embassy Office Parks REIT; target of Rs 390: ICICI Securities

ICICI Securities research report on Embassy Office Parks REIT

The Embassy Office Parks REIT (Embassy REIT) delivered a resilient performance in Q1FY24 with NOI of INR7.4bn (up 8% QoQ) and NDCF of INR5.1bn or INR5.4/unit. During the quarter, the REIT manager achieved 1.1msf of leasing and expects to achieve 6.0msf of gross leasing in FY24. While recovery in leasing decisions by GCCs and possible floor-wise denotification on the cards in H2FY24, the REIT manager has now chosen to give formal FY24 guidance range for NOI of INR29.3-31.4bn and NDCF of INR19.4-20.9bn or INR20.5-22.0/unit of distribution vs. I-sec estimate of INR21.8/unit.

Outlook

We retain our BUY rating with a revised Mar’24E NAV based target price of INR390/unit (earlier INR403) owing to balance sheet adjustments and occupancy adjustments post FY25E at asset level. Key risks are a slower recovery in office leasing and higher portfolio vacancy levels.