Hold Oberoi Realty; target of Rs 550: ICICI Direct

ICICI Direct's research report on Oberoi Realty

Oberoi Realty's Q4FY18 sales performance was below our estimate mainly due to subdued sales in Worli project. On the financials front, the results were above our estimates on the topline, bottomline front Oberoi Realty's (ORL) Q4FY18 sales volumes fell 13.6% sequentially to 1.31 lakh sq ft with sales value of Rs  263.3 crore. Sales volume was below our estimates of 1.66 lakh sq ft due to lower-than-expected sales of 9562 sq ft in Worli project (our expectation: 50000 sq ft) Revenues grew robustly by 19.1% YoY to Rs  345.0 crore and were slightly above our estimate of Rs  338.3 crore EBITDA margins expanded 80 bps YoY to 53.1% mainly on account of a change in the project mix. It was below our expectation of 54.3% PAT grew 40.4% YoY to Rs  142.9 crore (our estimate: Rs  114.4 crore) primarily due to topline growth and EBITDA margin expansion The board recommended a dividend of Rs  2.

Outlook

We like the company given the quality of land bank, its healthy balance sheet and management bandwidth to execute large projects. However, the sales momentum for ORL has been sluggish. Also, the stock has run up ~41% in the last one year. Hence, we await a better entry point. Consequently, we continue to maintain our HOLD recommendation on the stock with a revised target price of Rs  550.