Hold Oberoi Realty; target of Rs 340: ICICI Direct

Oberoi Realty’s (ORL) revenues grew 51.6% YoY to Rs 320.0 crore (our expectation: Rs 244.9 crore) mainly on account of better-than-expected project execution. Revenue recognition from the Esquire project came in at Rs 160.9 crore (our expectation: Rs 109.9 crore) EBITDA margin contracted 881 bps YoY to 52.1% due to a change in the project mix with the topline mainly driven by the Esquire project. However, the EBITDA margin was above our expectation of 48.2% The bottom line grew 32.1% YoY to Rs 107.9 crore (our expectation: Rs 76.8 crore) due to better-than-expected revenues & EBITDA margin Oberoi raised Rs 750 crore (@ 9.25% per annum coupon, payable half-yearly) through placement of new series of debentures.

Though there was a pick-up in execution, sales momentum has remained at lower level despite launch of Worli project. While we like ORL given the quality of land bank, healthy balance sheet, management bandwidth to execute projects, the stock has run up 41.1% in the past six months. Going forward, we see limited upside in the stock and do not expect a significant uptick in sales volume in near term. Hence, we downgrade the stock to HOLD recommendation and maintain our target price of Rs 340.  For all recommendations, click hereDisclaimer: 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.