Buy Oberoi Realty; target of Rs 247: GEPL Capital

GEPL Capital's report on Oberoi Realty

Oberoi Realty reported 9 percent Y-o-Y growth in topline in Q1FY14 at Rs 2,184 mn vs Rs 1,999 mn in Q1FY13. The weak sales can be attributed to low inventory in ready projects and low off-take in under construction projects -- Exquisite and Esquire. EBITDA was 17 percent higher Y-o-Y at Rs 1,335 mn in Q1FY14 vs Rs 1,139 mn in Q1FY13. EBITDA Margin improved 415 bps to 61.12 percent in Q1FY14 vs 56.98 percent in Q1FY13. This was due to higher occupancy and higher EBITDA margins in the investment properties. Lower Other Income (-32 percent Y-o-Y) and higher tax rate (31 percent vs 27 percent) caused PAT to show a flattish growth of 1 percent Y-o-Y. PAT came in at Rs 1,018 mn in Q1FY14 vs Rs 1,008 mn in Q1FY13. Consequently, PAT margin was 381 bps lower at 46.62 percent in Q1FY14 versus 50.43 percent in Q1FY13. Valuation & viewpoint: At the CMP of Rs 197, OBER is trading at 4x its FY15E EPS of Rs 45 and 1x its FY15E BV of Rs 187. OBER currently suffers from lack of new launches and pending approvals whereas the commercial space suffers from sluggish demand due to low economic activity. However, we feel that the 24 percent correction in its share price since the previous results were announced, factors in the concerns surrounding the company. We use an SOTP approach to arrive at the target price of Rs 247, with a BUY rating and an upside potential of 26 percent," says GEPL Capital research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.

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