Hold Oberoi Realty; target of Rs 375: ICICI Direct

ICICI Direct's research report on Oberoi Realty

ORL’s sales volume zoomed 2.8x YoY to 1.77 lakh sq ft in Q2FY17 boosted by Three Sixty West project where it manage to sell eight flats worth Rs 300.4 crore with sales volume of 68828 sq ft. Going ahead, with significant inquiries happening for the project, the company is hopeful of selling 50 flats (currently 29 flats sold) to meet revenue recognition threshold by FY17 end. Further, the Esquire project also reported strong sales with 10 flats sold worth Rs 53.5 crore with sales volume of 25102 sq ft. The quarter also witnessed strong presales worth Rs 500.4 crore.

We like ORL given the quality of land bank, its healthy balance sheet and management bandwidth to execute large projects. Though a pick-up in sales volumes was seen in Q2FY17 post a strong performance in a couple of projects, we would like to see a further improvement in sales volumes, going forward. Further, sales momentum has slowed down across ORL’s project portfolio with muted bookings in most projects. With the stock running up 22% in the past six months, we see limited upside at current levels despite rolling over our NAV to FY18E. Hence, we continue to maintain our HOLD rating on the stock with a revised target price of Rs 375.