Hold Oberoi Realty; target of Rs 577: Arihant Capital

Arihant Capital's research report on Oberoi Realty

Oberoi Realty (ORL) came out with weak set of numbers which were below our estimates. Q1FY20 results also look weak due to high base of last year, though on QoQ basis numbers were mostly flat. Revenue for the quarter fell 32.1% YoY to Rs 6033 mn against our estimate of Rs 6833 mn, EBITDA fell 49.1% YoY to Rs 2352 mn, below our estimate of Rs 2870 mn, while PAT declined 50.9% YoY to Rs 1521 mn, below our estimate of Rs 2187 mn. EBITDA margin stood at 39% against our estimate of 42%, a decline of 1300bps YoY mainly due to subdued margin of residential segment as Enigma and Sky City (tower E) are yet to reach margin recognition threshold.

Outlook

Despite weak results, we keep our faith intact on ORL due to its strong brand name and a dominant position in each of its micro market, which gives ORL enough bandwidth to tide over the current market slowdown with a strong visibility of future cash flows. We maintain our Hold rating with a revised target price of Rs 577.