Neutral Oberoi Realty; target of Rs 1200: Motilal Oswal

Motilal Oswal recommended Neutral rating on Oberoi Realty with a target price of Rs 1200 in its research report dated August 01, 2023.

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August 03, 2023 / 23:10 IST

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Motilal Oswal's research report on Oberoi Realty

Oberoi Realty’s stock has surged 22% in the last three months (in line with Nifty Realty), given improved macro sentiments for the real estate sector post the rate hike pause in Apr’23 and continued demand momentum. In our recent note, we highlighted that FY24 is likely to be a big launch year for OBER with INR120b of launches planned in 2HFY24 and will lead to 74% growth in pre-sales in FY24. In order to sustain a healthy 15-20% growth rate, the company would have to add new projects into the pipeline. During the 1QFY24 earnings con-call, the management indicated that it is actively discussing potential acquisitions of new land parcels and may also finalize the closure of a few deals in FY24, especially the one in Gurugram. However, with lot of projects (two projects in Thane, GSK-Worli, Peddar Road, Tardeo redevelopment, Andheri redevelopment), already in the plate which are yet to be launched,we believe the management may adopt a cautious approach toward business development and will unlikely be aggressive in pursuing new acquisitions. At CMP, the company is trading at 30% above its total NAV and at 60% premium to value of its residential pipeline thereby factoring in large portion of company’s expected growth. Hence, we downgrade the stock to NEUTRAL.

Outlook

We revise our TP to INR1,200 (vs. INR1,140 earlier), due to lower WACC assumptions, indicating a 9% upside potential. We downgrade the stock to ‘NEUTRAL’ from ‘BUY’.

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