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MOSL: OBEROI REALTY (Buy)-Pre-sales on track despite subdued environment

OBEROI REALTY: Pre-sales on track despite subdued environment

(OBER IN, Mkt Cap USD2.7b, CMP INR525, TP INR630, 20% Upside, Buy)

 

• Despite the lack of new launches, OBER exhibited good pre-sales momentum, led by sustained sales at existing projects across the micro markets in MMR. On the commercial side, strong leasing at Commerz II and construction progress of ongoing projects provide comfort.
• We cut our pre-sales estimate for FY20/21 to factor in the delay in Thane and Exquisite III project launches. However, we broadly maintain estimates for the leasing and hospitality segments. Maintain Buy with a TP of INR630. 

Residential sales pick up; Leasing on strong footing

• Revenue came in flat YoY at INR5,274m (our estimate: INR4,758m) in 3QFY20. EBITDA grew 22% YoY to INR2,299m (our estimate: INR1,966m), with the margin expanding 800bp YoY to 43.6% (our estimate: 41.3%). Adj. PAT was up 7% YoY at INR1,482m (our estimate: INR2,162m). We had estimated INR860m profit from associate due to revenue recognition from 360 West in 3QFY20, which did not come through.
• Residential picks up despite subdued real estate trends in MMR: Pre-sales volumes were up 5% YoY (+11% QoQ) at 0.16msf in 3QFY20, largely driven by strong bookings in Exquisite, Prisma and Maxima. Booking value grew 26% YoY to INR3,033m. Notably, sales traction remained healthy in existing projects across the micro markets in MMR. Launch of Thane project and Exquisite III in 1HFY21 bode well from the volume perspective.
• Leasing segment on strong footing: Revenue/EBITDA grew 6%/7% YoY to INR918m/INR884m, with EBITDA margin expansion of 120bp YoY to 96.3%. Leasing revenue was largely driven by ramp-up in Commerz II, where occupancy increased YoY from 64% to 100%. Construction of annuity assets is on track and will likely drive the next leg of growth.