Motilal Oswal Ltd. (MOSL) in its earning note on Oberoi Realty (OBER) mentioned the company reported a mixed set of numbers. On one hand, they reported strong pre-sales on the other hand their profits were subdued.
OBER clocked a pre-sale of RS1,150cr in 2QFY23, up 39% YoY/52% QoQ and was 28% above MOSL estimates. Total revenues declined by 9% YoY/25% QoQ to Rs690cr and were 27% below MOSL estimates largely due to slower-than-expected execution at Mulund projects. EBITDA margin remained healthy at 45% while PAT stood at Rs310cr, up 20% YoY but down 21% QoQ and was 46% below MOSL estimates.
OBER reopened sales at its ultra-luxury project 360 West in Worli and reported sales of eight units worth Rs600cr. Occupancy at Commerz I improved marginally QoQ. Revenue/EBITDA for the commercial portfolio remained flat QoQ at Rs71cr/Rs66cr, respectively. Despite a drop-in occupancy rate to 83% in 2Q from 91% in 1Q, their revenue was steady owing to an increase in ARR at the Westin Hotel which improved by 5% QoQ.
MOSL believes a strong launch pipeline of OBER is expected to drive pre-sales growth in FY23E. The management was confident to launch its Pokhran Road (Thane) project in 3QFY23E, while the Kolshet Road (Thane) project is expected to be launched in 2HFY23E. Aided by a strong launch pipeline and higher-than-expected pricing and velocity at 360 West (Worli), MOSL has increased their FY23 pre-sales estimates by 11% to Rs5300cr, up 36% YoY.
The Key management also mentioned that depending upon the stage of construction and balance inventory, they have hiked prices by 5-10% across its projects in Borivali, Goregaon, and Mulund. Construction at Commerz III is expected to be completed by the end of FY24 where they were witnessing significant leasing interest in the asset.
OBER has taken up an SRA project adjacent to the ongoing project at Borivali. The project site is 95% cleared and will be used for commercial development. Management continues to remain committed on BD and is close to signing a redevelopment project in Mumbai and has also paid some advances in 2QFY23.
Because of the delayed execution at Mulund projects, MOSL has reduced their FY23/FY24 EBITDA estimates by 13%/12%, respectively but given that the management has indicated strong visibility on business development which will provide further growth visibility and is a key re-rating trigger. MOSL has Reiterated its BUY rating with an unchanged SOTP-based Target Price of INR1,100.
