Buy Oberoi Realty; target of Rs 654: Motilal Oswal

Motilal Oswal's research report on Oberoi Realty

Flattish volumes; booking value lower by 24% YoY: OBER’s sales volumes declined 3% YoY to 131,052sf (est. of 132,500sf) and sales value fell 24% YoY to INR2,633m (est. of INR3,095m) in 4QFY18, primarily due to falling traction in its 360 West project. Collections increased 18% YoY to INR5,466m due to higher collection in its Enigma and Esquire projects. OBER’s revenue grew 19% YoY to INR3,450m (est. of INR3,139m) in 4QFY18. EBITDA margin expanded 80bp YoY to 53.1% (est. of 54.1%). Adjusted PAT rose 40% YoY to INR1,429m (est. of INR1,073m), primarily led by a lower tax rate of 20.1%.

Outlook

We value OBER at INR654/share on FY19E. Our calculation captures value emerging from the company’s existing development potential. We maintain our positive view on the stock, with RoE/RoCE expected to improve to 25%/19% by FY19. Maintain Buy. OBER is our preferred Mumbai micro-market play.