february 2, 2018 oberoi realty (oberea) |...

February 2, 2018

ICICI Securities Ltd | Retail Equity Research

Result Update

Strong financial performance…

Oberoi Realty's Q2FY18 sales performance was below our

expectations mainly on account of subdued sales in the Eternia and

Enigma projects. On the financial front, the results were above our

estimates on all parameters

Sales volumes declined 12.5% sequentially to 1.51 lakh sq ft with

sales value of | 406.3 crore. Sales volume was below our estimates

of 1.8 lakh sq ft mainly on account of lower-than-expected sales

volume of 6680 sq ft in ‘Eternia project’ (our expectation: 20000 sq ft)

and no sales in Enigma project (our estimate: 20000 sq ft)

Revenues grew robustly by 41.2% YoY to | 356.2 crore (our

estimate: | 326.0 crore)

EBITDA margin expanded 400 bps YoY to 54.1% mainly on account

of a change in the project mix. It was above our expectation of 53.1%

PAT grew 42.6% YoY to | 120.2 crore (our estimate: | 110.7 crore)

led by topline growth and strong EBITDA margin expansion

Sales volumes decline 12.5% QoQ to 1.51 lakh sq ft…

Oberoi’s sales volumes de-grew 12.5% QoQ to 1.51 lakh sq ft in Q3FY18

due to poor performance in Mulund projects with sales volumes of 6680

sq ft (our expectation: 40000 sq ft). Going forward, ORL would look to

launch a project in Thane and subsequent phases of Borivali and Mulund

projects. Consequently, we expect sales volumes to grow from 0.6 msf in

FY17 to 1.5 msf in FY20E.

Mumbai market could face supply side crunch in future…

The management is of the view that there could be a supply-side

constraint in the Mumbai market over the next two years given the

dumping ground issue which has not been sorted out. However, on a

positive note, the company has all approvals in place for all its projects.

Over the past two years, no new approvals have been issued to

developers. Furthermore, the management has mentioned that there has

already been over-supply in the Mulund market. While, in Worli market,

there is supply but the company has a differentiated product in place so it

wont be much impacted.

Revenue recognition timelines delayed…

The management has given its revenue recognition threshold timelines. It

expects SkyCity to reach threshold in Q1FY19, Eternia in Q2FY19E,

Enigma in Q3FY19E and Worli in H1FY19. However, we still expect the

company to maintain healthy topline, PAT growth of 50.1%, 38.0% CAGR

to | 2835.7 crore, | 814.0 crore, respectively, over FY18-20E.

Looks to commence operations at new mall by 2020…

For Worli mall (on Glaxo land), the work has started. It plans to complete

it by 2020. While for the Borivali mall is at the design stage and some

excavation work has started. Furthermore, for Commerz II, the company

expects to sign one new client in Q4FY18 and close the year with

occupancy close to 65-70% (44.7% in Q3FY18)

Await better entry point; maintain HOLD…

We like the company given the quality of land bank, its healthy balance

sheet and management bandwidth to execute large projects. Even, the

sales performance has shown signs of improvement. We roll over our

valuations to FY20E. However, the stock has run up ~35% in the last six

months. However, we await a better entry point. Hence, we continue to

maintain our HOLD rating on the stock with a revised target price of | 490.

Rating matrix

Rating : Hold

Target : | 490

Target Period : 12 months

Potential Upside : 0%

What’s Changed?

Target Changed from | 450 to | 490

EPS FY18E Changed from | 20.6 to | 12.6

EPS FY19E Changed from | 25.7 to | 27.7

EPS FY20E Introduced at | 24.0

Rating Unchanged

Quarterly Performance

| crore Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)

Revenue 356.2 252.2 41.2 303.5 17.4

EBITDA 192.6 126.3 52.5 163.8 17.6

EBITDA (%) 54.1 50.1 400 bps 54.0 12 bps

PAT 120.2 84.3 42.6 104.3 15.2

Key Financials

| Crore FY17 FY18E FY19E FY20E

Net Sales 1,113.7 1,258.7 2,983.9 2,835.7

EBITDA 570.2 666.1 1,491.2 1,331.0

Net Profit 378.7 427.2 940.7 814.0

EPS (|) 11.2 12.6 27.7 24.0

Valuation summary

(x) FY17 FY18E FY19E FY20E

P/E 43.9 39.0 17.7 20.4

Target P/E 43.9 38.9 17.7 20.4

EV / EBITDA 26.9 23.5 10.4 11.4

P/BV 2.9 2.7 2.4 2.2

RoNW (%) 6.6 7.0 13.7 10.7

RoCE (%) 8.6 8.4 17.4 14.4

Stock data

Particular Amount (| crore)

Market Capitalization 16,644.0

Total Debt 901.6

Cash 1,763.0

EV 15,782.6

52 week H/L (|) 562 / 319

Equity capital 328.2

Face value (|) 10.0

Price performance (%)

Return % 1M 3M 6M 12M

Sobha (9.1) 8.3 41.9 119.1

Sunteck Realty (2.7) 14.1 77.4 236.4

Mahindra Lifespace 6.9 9.5 16.0 49.9

Oberoi Realty 9.3 14.8 35.0 71.8

BSE Realty 0.1 16.9 20.8 90.1

Research Analyst

Deepak Purswani, CFA

[email protected]

Vaibhav Shah

[email protected]

Oberoi Realty (OBEREA) | 490


Variance analysis

[

Q3FY18 Q3FY18E Q3FY17 YoY (Chg %) Q2FY18 QoQ (Chg %) Comments

Income from Operation 356.2 326.0 252.2 41.2 303.5 17.4 Revenues grew robustly on acount of strong execution

Other Income 4.2 5.0 12.7 -67.2 5.0 -16.3

Operating Cost 137.1 118.9 99.7 37.5 110.7 23.9

Employee cost 15.0 22.5 17.3 -13.4 18.5 -19.2

Other expenditure 11.5 11.3 9.0 28.3 10.6 9.1

EBITDA 192.6 173.2 126.3 52.5 163.8 17.6

EBITDA Margin (%) 54.1 53.1 50.1 400 bps 54.0 12 bps The EBITDA margin expansion was led by change in the project mix

Depreciation 12.2 12.8 12.5 -2.2 12.8 -4.3

Interest 1.8 1.6 1.5 20.8 1.6 11.1

PBT 182.8 163.8 125.0 46.2 154.4 18.4

Taxes 63.5 54.0 40.7 56.1 50.9 24.8

PAT 120.2 110.7 84.3 42.6 104.3 15.2 Robust PAT growth was led by strong topline growth and EBITDA margin

expansion

Key Metrics

Sales Volume (in sq ft) 151,763 180,000 106,214 42.9 173,403 -12.5 Sales volumes degrowth was on account of poor sales performance at Mulund

projects

Source: Company, ICICIdirect.com Research

Change in estimates

FY20E

(| Crore) Old New % Change Old New % Change Introduced Comments

Revenue 2,224.5 1258.7 -43.4 2703.4 2983.9 10.4 2835.7 We have revised our estimates downwards for FY18 as we have

delayed revenue recognition of Mulund, Borivali and Worli projects

in-line with management commentary

EBITDA 1,085.2 666.1 -38.6 1315.3 1491.2 13.4 1331.0

EBITDA Margin (%) 48.8 52.9 411 bps 48.7 50.0 128 bps 46.9

PAT 685.0 427.2 -37.6 852.1 940.7 10.4 814.0

EPS (|) 20.9 12.6 -37.6 26.0 27.7 10.4 24.0

FY18E FY19E


Assumptions

FY16 FY17 FY18E FY18E FY19E FY19E FY20E Comments

Volume sold in msf New Earlier New Earlier Introduced

Goregaon 0.2 0.1 0.2 0.2 0.3 0.5 0.2

Andheri/Borivali 1.1 0.2 0.2 0.2 0.5 0.5 0.6

Worli 0.0 0.2 0.1 0.2 0.1 0.2 0.2

Mulund 0.0 0.1 0.1 0.1 0.3 0.3 0.4

Pune 0.0 0.0 0.0 0.0 0.2 0.2 0.2

Total 1.3 0.6 0.6 0.7 1.5 1.6 1.5 We have tweaked our estimates



Conference call highlights:

Revenue recognition: The management has delayed their revenue

recognition threshold timelines. The company expects SkyCity to

reach threshold in Q1FY19, Eternia in Q2FY19E, Enigma in

Q3FY19E and Worli in H1FY19

Commerz II update: The company expects to sign new client in

Q4FY18 and close the year with occupancy close to 65-70%

(44.7% in Q3FY18)

New launches: The company is looking to launch Exquisite Phase

III in Q1FY19E

Mall update: The Borivali mall is at the design stage and some

excavation work has started. While for Worli mall also (on Glaxo

land), the work has started and the company plans to complete it

by 2020

Mulund project sales momentum: The sales momentum at

Mulund projects has been impacted as the company is unable to

come to terms with Mulund being a cash market, where 90% of

the developers are selling in cash

Esquire project: The company has applied for occupational

certificate for Esquire project on January 29, 2018


Company Analysis

Sales volumes grow robustly…

Oberoi reported a subdued sales performance with sales volumes de-

growing 12.5% QoQ to 1.51 lakh sq ft in Q3FY18 with sales value of

| 406.3 crore. The weak sales performance was mainly on account of

poor sales at Eternia & Enigma projects which reported sales volumes of

6680 sq ft and nil, respectively. However, on a positive note, the company

reported strong sales performance at its Worli and Borivali projects which

recorded sales volumes of 47479 sq ft and 47027 sq ft in Q3FY18,

respectively. Going forward, ORL would look to launch a project in Thane

and subsequent phases of Borivali and Mulund projects. Also, in early

FY19E, it is planning to launch third phase of Goregaon project

Consequently, we expect the sales volumes to grow from 0.6 msf in FY17

to 1.5 msf in FY20E

Exhibit 1: Sales volume picking up

10.2

1.4

1.4

7

1.0

6

1.3

5

1.7

3

1.5

2

1.7

7

0.9

8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

(la

kh s

q f

t)

Source: Company, ICICIdirect.com, Research

Exhibit 2: Sales volumes to improve here on…

0.2 0.2 0.1 0.20.3 0.20.0

0.1

0.50.6

0.1

0.1 0.2

0.3 0.4

0.2 0.2

0.3

1.0

1.3

0.6 0.6

1.5 1.5

0.2

1.1

0.2

0.0

0.5

1.0

1.5

2.0

FY14 FY15 FY16 FY17 FY18E FY19E FY20E

(m

n s

q f

t)

Goregaon Andheri/Borivali Worli Mulund Pune


Launches in Borivali, Mulund to adversely impact overall realisation…

ORL’s average realisation has been at a higher level mainly due to the

higher proportion of Oberoi Exquisite and Oberoi Esquire projects.

However, going ahead, with higher proportion of sales volume to be

derived from its Mulund and Borivali projects, we expect average

realisation to come down from current levels.

Exhibit 3: Quarterly average realisation trend

23,556

19,153

21,512

16,412

23,556

22,644

18,303

23,556

19,153

22,644

17,233

23,499

19,671

22,644

17,011

19,153

10,000

15,000

20,000

25,000

30,000

Goregaon

(Exquisite)

Goregaon

(Escquire)

Andheri Overall

(|

per sq ft)

Q4FY17 Q1FY18 Q2FY18 Q3FY18


Exhibit 4: Annual realisation trend across projects

10,000

15,000

20,000

25,000

30,000

Goregaon

(Exquisite)

Goregaon

(Escquire)

Mulund Borivali Overall

(|

per sq ft)

FY16 FY17 FY18E FY19E FY20E



Exhibit 5: Ongoing residential projects operational metrics

Particulars Q3FY18 Q2FY18 Q1FY18 Q4FY17 Q3FY17 Q2FY17

Area Booked (sq ft)

Oberoi Esquire 24432 50051 21106 21106 28016 16920

Oberoi Exquisite 17550 5330 6890 6890 1820 25102

Three Sixty West 47479 15020 45427 45427 28686 68288

Priviera - - - - - -

Prisma 8595 8958 12364 12364 2602 11395

Eternia 6680 21270 13140 13140 6240 15380

Enigma 0 16860 10107 10107 3070 10720

Sky City 47027 55914 26362 26362 35780 28514

Total 151,763 173,403 135,396 135,396 106,214 177,306

Sales Value (| crore)

Oberoi Esquire 48.1 103.0 38.2 38.2 53.7 53.5

Oberoi Exquisite 41.2 12.8 16.2 16.2 4.4 40.7

Three Sixty West 214.7 76.1 187.8 187.8 131.1 300.6

Priviera - - - - - -

Prisma 15.2 16.1 22.3 22.3 4.5 19.5

Eternia 10.3 32.1 20.7 20.7 9.9 23.7

Enigma - 25.3 16.9 16.9 5.3 17.8

Sky City 76.9 88.0 43.3 43.3 58.6 45.8

Average Realization for the quarter (|/sq ft)

Oberoi Esquire 19,671 20,583 18,113 18,113 19,153 31,608

Oberoi Exquisite 23,499 23,996 23,556 23,556 24,231 16,230

Three Sixty West 45,222 50,646 41,341 41,341 45,691 44,024

Priviera** - - - - - -

Prisma 17,708 17,962 18,012 18,012 17,333 17,139

Eternia 15,359 15,068 15,769 15,769 15,817 15,403

Enigma - 14,994 16,721 16,721 17,296 16,576

Sky City 16,342 15,740 16,421 16,421 16,383 16,048

Project Completion (%)

Oberoi Esquire 88.3 82.2 71.4 71.4 63.8 57.3


Three Sixty West * * * * * *

Priviera 100 100 100 100 100 100

Prisma 74.0 62.0 58.1 58.1 55.8 53.9

Eternia * * * * * *

Enigma * * * * * *

Sky City * * * * * *

Inventory as on Date (sq ft)


Three Sixty West 1938571 1986050 1442777 1471463 1488204 1516890

Priviera ** 0 0 0 2350 2350 2350

Prisma 68517 77112 89248 91850 101612 104214

Eternia# 280810 287490 311880 318120 325020 331260

Enigma# 436499 436499 455434 458504 465541 468611

Sky City# 745183 792210 880021 915801 906383 942163


Note : * Yet to reach threshold # Basis area opened for booking ** Calculated on carpet area


Rental, hospitality portfolio – Icing on the cake…

ORL also enjoys a strong leasing and profitable hospitality portfolio

wherein it has Commerz I & II (Commercial Space), Oberoi Mall (Retail

Property) and The Westin Mumbai Garden City (Hospitality).

In the leasing portfolio, ORL has leased out ~0.9 mn sq feet (~94% of the

total available area) in Commerz I and Oberoi Mall. Beside this, ORL has

also completed Commerz-II Phase I (0.7 mn sq ft). Recently, it concluded

a deal with Teva Pharmaceuticals to lease out ~1 lakh sq ft. Furthermore,

Samsung India Electronics has leased ~1.1 lakh sq ft space in Oberoi

Commerz II in Goregaon for ~| 145/ sq ft per month. The lease is for nine

years with 15% rental escalation every three years. Overall, the lease

revenue is expected to grow to | 266.0 crore in FY20E vs. | 173.0 crore in

FY17 driven by the incremental leasing in Commerz II phase I.

Exhibit 6: Leasing trend

0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

0.6 0.70.5 0.5 0.5

0.50.5

0.5

0.50.5

0.8 0.9 0.90.9

1.0

1.2

1.41.5

0.0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

(m

n s

q f

t)

Commerz I Commerz II Phase I Oberoi Mall


Exhibit 7: Leasing revenue trend

46 48 47 47 46 43 43 43

86110

79 8794 94

100

107

111

113

126135

147 150

173

210

241

266

0

75

150

225

300

FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

(|

crore)

Commerz I Commerz II Phase I Oberoi Mall


ORL also has The Westin Mumbai Garden City Hotel in Goregaon, which

is part of the mixed development in Oberoi Garden City. It is a five star

hotel with 269 rooms and is managed by the Westin Group. In FY17, it

reported a revenue and EBITDA of | 126.6 crore and | 34.5 crore,

respectively. Going ahead, we expect it to post a topline and bottomline

of | 151.6 crore and | 53.1 crore, respectively, in FY20E.

Exhibit 8: Hotel revenue trend

122.8128.0 126.6

131.2

141.0

151.6

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

FY15 FY16 FY17 FY18E FY19E FY20E

(|

crore

)


Exhibit 9: Westin’s operating profit trend

33.0

41.6

43.6

45.2

48.6

53.1

32.5

26.9

34.5

34.534.5

35.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

FY15 FY16 FY17 FY18E FY19E FY20E

(|

crore)

24

27

30

33

36(%

)

EBITDA Margins (RHS)



Exhibit 10: Operational trend in Oberoi’s rental and hospitality portfolio

Particulars Q2FY18 Q1FY18 Q4FY17 Q3FY17 Q2FY17

Oberoi Mall (Retail Property)

Operating Revenue (| crore) 26.8 26.7 25.7 25.3 24.7

EBITDA margin (%) 73.4 92.7 93.3 93.9 93.6

Occupancy (%) 98.7 99.1 99.7 99.9 90.9

Realisation (|/sqft/month) 164 162 155 152 164

Commerz I (Commercial Space)


EBITDA margin(%) 99.0 99.6 99.5 98.8 100.3

Occupancy (%) 82.1 88.5 88.5 88.5 88.5


Commerz II Phase I (Commercial Space)


EBITDA margin(%) 82.8 84.2 80.4 68.4 49.6

Occupancy (%) 44.7 44.7 29.9 29.9 27.1


The Westin Mumbai Garden City

(Hospitality)


EBITDA margin(%) 31.8 34.5 38.9 39.4 28.8

Average Room Rate (|) 8209 8030 8532 8889 8226

Occupancy (%) 78.0 81.6 85.7 81.5 75.0

RevPAR (|) 6416 6546 7312 7255 6173



Revenues recognised to grow at 50.1% CAGR over FY18-20E…

Revenues de-grew 20.9% YoY to | 1113.7 crore in FY17 in the absence of

any new project hitting the revenue recognition threshold and slow sales

momentum. Going forward, we expect ORL’s revenues to grow robustly

at 50.1% CAGR over FY18-20E to | 2835.7 crore as its Mulund, Borivali

and Worli projects are expected to hit revenue recognition threshold in

the next couple of years. More revenues are expected to get recognised

from completed projects such as Oberoi Exquisite.

Exhibit 11: Revenues to grow at 50.1% CAGR over FY18-20E…

1,408.1

1,113.7

1,258.7

2,835.72,983.9

500

1000

1500

2000

2500

3000

3500


(|

crore)

CAGR - 50.1%


EBITDA margin to contract ahead…

The EBITDA margin has dropped significantly in FY16 to 47.4%. However,

with a change in the project mix, margins rose to 51.2% in FY17. Going

ahead, we expect margins to be in the range of 46-50% given the larger

share of residential revenues recognition, which is typically of lower

margins compared to hospitality and leasing segments.

Exhibit 12: EBITDA margin trend

47.4

51.2 52.9

50.0

46.9

35

40

45

50

55

60


(%

)


ORL’s revenues are expected to grow at a CAGR of 50.1%

CAGR during FY18-20E


Net profit to grow at 38.0% CAGR during FY18-20E…

Overall, we expect ORL’s bottomline to grow at a CAGR of 51.8% during

FY18-20E to | 814.0 crore, with Eternia, Enigma & SkyCity projects hitting

revenue recognition during this period. This would aid the bottomline

significantly, going forward.

Exhibit 13: PAT to grow at 38.0% CAGR during FY18-20E

425.9 378.7 427.2 940.7 814.0

0

250

500

750

1000


(|

crore)

CAGR - 38.0%


Return ratio to improve over FY18-20E…

Given the lower revenue recognition and profitability in FY17, ORL’s

return ratio dropped to single digit in FY17. However, with better

revenues and profitability coming in FY18E & FY19E, we expect ORL’s

return ratio to bounce to levels of 14.4% RoCE and 10.7% RoE in FY20E.

Exhibit 14: Return ratio to bounce back

11.3

8.0

8.6

8.4

17.4

14.4

6.67.0

13.7

10.7

0

4

8

12

16

20


(%

)

RoCE RoNW


We expect ORL’s bottomline to grow at a CAGR of 38.0%

during FY18-20E to | 814.0 crore, with Eternia & Enigma

projects hitting revenue recognition during this period


Outlook and Valuation

We like the company given the quality of land bank, its healthy balance

sheet and management bandwidth to execute large projects. Even the

sales performance has shown signs of improvement. We roll over our

valuations to FY20E. However, the stock has run up ~35% in the last six

months. So, we await a better entry point. Hence we continue to maintain

our HOLD recommendation on the stock with a revised TP of | 490.

Exhibit 15: Valuation

Location Type Status

Saleable Area ( in mn

sq ft) NAV NAV Multiple Value (| cr) |/share

Goregaon 10.1 8,419.3 7,801.2 230.0

Oberoi Mall Retail Completed 0.6 1,346.5 1.0 1,346.5 39.7

Commerz I Commercial Completed 0.4 539.0 1.0 539.0 15.9

Westin Hotel Completed 0.4 1,076.0 1.0 1,076.0 31.7

Exquisite I Residential Ongoing 1.5 221.6 1.0 221.6 6.5

Exquisite II Residential Ongoing 1.5 757.7 1.0 757.7 22.3

Commerz II Phase I Commercial Ongoing 0.7 1,555.6 0.9 1,400.0 41.3

Exquisite III Residential Planned 1.9 1,269.2 1.0 1,269.2 37.4

Commerz II Phase II Commercial Planned 1.7 1,541.9 0.7 1,079.3 31.8

Oberoi International school Social Infrastructure Ongoing 0.3

Education complex Planned 0.9

Hospital Planned 0.4

Andheri/Khar/Borivali 3.1 3,644.8 3,613.2 106.5

Oberoi Maxima Commercial Ongoing 0.3 242.9 0.9 218.6 6.4

Oberoi Prisma Residential Ongoing 0.7 142.1 1.0 142.1 4.2

Oberoi Splendour IT park Commercial Planned 0.1 73.7 0.9 66.3 2.0

Oberoi Splendour school Social Infrastructre Planned 0.4 14.7 1.0 14.7 0.4

Borivali Residential 4.5 3,171.6 1.0 3,171.6 93.5

Worli 3.4 2,168.7 1,873.3 55.2

Oasis Residential Residential Ongoing 2.3 691.8 1.0 691.8 20.4

Oasis Commercial Commercial Ongoing 0.2 121.2 0.8 97.0 2.9

Oasis Mall Retail Ongoing 0.1 61.4 0.8 49.1 1.4

Oasis Hospitality Hospital Ongoing 0.2 83.6 0.8 66.9 2.0

I-Ventures Residential 0.5 1,210.6 0.8 968.5 28.6

Thane Residential Planned 10.2 2,216.7 1.0 2,216.7 65.3

Mulund 3.2 1,463.4 1,463.4 43.1

Eternia Residential Ongoing 1.6 682.0 1.0 682.0 20.1

Enigma Residential Ongoing 1.6 781.3 1.0 781.3 23.0

Pune 1.3 100.4 93.8 2.8

Sangam city - Residential Residential Planned 0.8 67.3 1.0 67.3 2.0

Sangam city - Commercial Commercial Planned 0.3 16.8 0.8 13.5 0.4

Sangam city - Retail Retail Planned 0.3 16.3 0.8 13.0 0.4

Net cash/ (Debt) (373.8) 1.0 (373.8) (11.0)

Total 31.4 17,639.5 0.9 16,687.7 492

Rounded off Target price 490

111.9 1.0 111.9 3.3


Exhibit 16: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

FY17 1113.7 -20.9 11.2 -11.1 43.9 26.9 6.6 8.6

FY18E 1258.7 13.0 12.6 12.8 39.0 23.5 7.0 8.4

FY19E 2983.9 137.1 27.7 120.2 17.7 10.4 13.7 17.4

FY20E 2835.7 -5.0 24.0 -13.5 20.4 11.4 10.7 14.4



Recommendation History vs. Consensus

0

150

300

450

600

750

Jan-18Nov-17Aug-17May-17Feb-17Nov-16Aug-16May-16Feb-16Nov-15Aug-15Jun-15Mar-15Dec-14

(|

)

0.0

20.0

40.0

60.0

80.0

100.0

(%

)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events

Date Event

Jun-15 Oberoi Realty approves raising of | 324 crore through preferential issue of shares to Aranda Investments, an indirect subsidiary of Temasek Holdings

Aug-15 As per media sources, Oberoi Realty to buy Crompton Greaves’ Worli building spread over ~1 acre for over | 200 crore.

Oct-15 Oberoi Realty launches its multi-tower project “Sky City” at Borivali spread across 25 acres consisting of multiple towers of up to 60 storeys each. The project has a

saleable area of ~4.5 million square feet (msf) and the company expects to earn revenues of ~| 6000-7000 crore from the project

Mar-16

The Bombay High Court stays new constructions of either residential/commercial buildings or hotels in Mumbai from March 1, 2016 because the state government

and Brihanmumbai Municipal Corporation (BMC) have failed to comply with the municipal solid waste (MSW) rules at Deonar and Mulund dumping grounds,due to

which Oberoi will be unable to launch projects until the ban is lifted

Mar-16 Rajya Sabha passes the real estate regulation bill paving the way for regulation in the real estate sector. The bill would promote timely execution of projects, ensure

speedy adjudication of disputes and help promote private participation, positive for Oberoi

Apr-16 Swedish furniture retailing giant Ikea in talks with Oberoi Realty to buy a built-to-suit retail space for over | 900 crore in Borivali. As per media reports, if the deal

happens, this will monetise Oberoi's landbank at better prices of ~| 112.5 crore per acre vs. Oberoi's acquisition price of ~| 46.2 crore per acre

May-16 Oberoi allots 59,104 equity Shares of | 10 each to certain option grantee(s) pursuant to exercise by them of options granted to them under Company’s Employee

Stock Option Scheme 2009. The exercise price for options is | 260/ share. Post allotment, share capital has increased to | 339.4 crore.

Aug-16

According to media sources, Oberoi Realty is in talks with US-based investor Morgan Stanley and Singapore’s sovereign fund, GIC, to set up a joint venture (JV) for

developing malls. The venture would have a corpus of | 1,000 crore. Oberoi is expected to hold about 75%. Further, it could also initiate talks with Canada Pension

Plan Investment Board, which has shown an interest in buying in malls

Sep-16 Teva Pharmaceuticals buys ~1.0 lakh sq ft space in Oberoi Commerz II in Goregaon

Mar-17 Samsung India Electronics leases ~1.1 lakh sq ft space in Oberoi Commerz II in Goregaon for ~| 145/ sq ft per month. The lease is for nine years with 15% rental

escalation every three years

Sep-17 Oberoi Realty has acquired GlaxoSmithKline (GSK) Pharmaceuticals’ 60 acre land parcel at Thane for | 555 crore.


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Oberoi (Vikas Ranvir) 31-Dec-17 62.7% 212.9 0.0

2 R S Estate Developers Pvt. Ltd. 31-Dec-17 9.8% 33.3 0.0

3 Franklin Advisers, Inc. 31-Dec-17 3.1% 10.4 0.0

4 Franklin Templeton Investment Management Ltd. 31-Dec-17 3.1% 10.4 0.0

5 Aranda Investments (Mauritius) Pte. Ltd. 30-Sep-17 2.0% 6.7 -2.5

6 APG Asset Management 31-Dec-17 1.7% 5.6 0.0

7 L&T Investment Management Limited 31-Dec-17 1.3% 4.5 0.2

8 OppenheimerFunds, Inc. 31-Dec-17 1.2% 4.2 0.0

9 Wellington Management Company, LLP 31-Dec-17 1.2% 4.0 0.0

10 BlackRock Asset Management North Asia Limited 30-Sep-17 0.9% 3.2 0.0

(in %) Mar-17 Jun-17 Sep-17 Dec-17

Promoter 72.5 72.5 72.5 72.5

FII 25.4 25.4 24.9 22.6

DII 0.3 0.6 0.7 2.9

Others 1.8 1.6 1.8 2.0

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value (m) Shares (m) Investor name Value (m) Shares (m)

FIL Investment Management (Hong Kong) Limited 2.2 0.3 Aranda Investments (Mauritius) Pte. Ltd. -16.1 -2.5

L&T Investment Management Limited 1.2 0.2 BlackRock Investment Management, LLC -2.8 -0.5

DHFL Pramerica Asset Managers Private Limited 0.9 0.1 FIL Investment Management (Singapore) Ltd. -2.8 -0.4

Wellington International Management Company Pte. Ltd. 0.8 0.1 BlackRock Financial Management, Inc. -1.2 -0.2

UTI Asset Management Co. Ltd. 0.8 0.1 Franklin Templeton Investments (Asia) Ltd. -0.7 -0.1

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement (| Crore)

(Year-end March) FY17 FY18E FY19E FY20E

Net Sales 1,098.1 1,253.6 2,978.2 2,829.5

Other Operating Income 15.6 5.1 5.7 6.2

Total Operating Income 1,113.7 1,258.7 2,983.9 2,835.7

Growth (%) -20.9 13.0 137.1 -5.0

Operating Costs 437.1 475.7 1,369.6 1,375.2

Employee Expenses 64.2 67.4 70.7 74.3

Other Expenses 42.3 44.5 46.7 49.0

Total Operating Expenditure 543.6 587.5 1,487.0 1,498.5

EBITDA 554.6 666.1 1,491.2 1,331.0

Growth (%) -16.9 16.8 123.9 -10.7

Depreciation 49.5 51.3 52.5 53.7

Interest 5.6 6.0 60.7 91.1

Other Income 47.3 23.7 26.0 28.6

PBT 562.4 632.5 1,404.0 1,214.9

Prior Period Adjustments 0.0 0.0 0.0 0.0

Total Tax 186.9 208.7 463.3 400.9

PAT before profit from associates 375.6 423.8 940.7 814.0

Minoriy Interest 0.0 0.0 0.0 0.0

Profit from associates 3.1 3.5 80.7 16.1

PAT 378.7 427.2 940.7 814.0

EPS (|) 11.2 12.6 27.7 24.0


Cash flow statement (| Crore)


Profit after Tax 378.7 427.2 940.7 814.0

Depreciation 49.5 51.3 52.5 53.7

Interest 71.8 6.0 60.7 91.1

Others -46.2 -23.7 -26.0 -28.6

Net Increase in Current Assets -475.2 -114.7 -1757.4 -399.6

Net Increase in Current Liabilities 190.7 -562.4 995.6 44.8

Net cf from operating activities 173.6 -216.4 266.1 575.3

(Purchase)/Sale of Fixed Assets -76.3 -25.0 -25.0 -25.0

Others -46.2 -23.7 -26.0 -28.6

Net cf from Investing Activities -438.9 -1.4 1.0 3.6

Inc / (Dec) in Equity Capital 6.0 0.0 0.0 0.0

Inc / (Dec) in Loan Funds -18.0 650.0 0.0 0.0

(Payment) of Dividend & Div. Tax 0.0 -64.1 -141.1 -122.1

Interest paid -52.5 -6.0 -60.7 -91.1

Net cf from Financing Activities 335.6 579.9 -201.8 -213.2

Net Cash flow 39.8 362.2 65.3 365.7

Opening Cash/Cash Equivalent 311.9 351.7 713.9 779.1

Closing Cash/ Cash Equivalent 351.7 713.9 779.1 1,144.9


Balance sheet (| Crore)


Equity Capital 339.5 339.5 339.5 339.5

Preference Capital 0.0 0.0 0.0 0.0

Reserve and Surplus 5,386.4 5,749.6 6,549.1 7,241.0

Total Shareholders funds 5,726.0 6,089.1 6,888.7 7,580.5

Total Debt 868.6 1,518.6 1,518.6 1,518.6

Total Liabilities 8,454.1 8,904.8 10,700.1 11,436.7

Assets

Gross Block 1,042.8 1,067.8 1,092.8 1,117.8

Less Accumulated Depreciation 98.3 149.5 202.0 255.6

Net Block 944.5 918.2 890.8 862.1

Capital WIP 109.5 109.5 109.5 109.5

Total Fixed Assets 1,054.0 1,027.7 1,000.3 971.6

Goodwill on consolidation 0.0 0.0 0.0 0.0

Investments 1,824.3 1,824.3 1,824.3 1,824.3

Inventory 3,766.4 4,137.6 4,870.7 5,332.6

Debtors 105.8 143.1 171.7 206.1

Loans and Advances 1,234.0 940.2 1,935.8 1,839.2

Cash 351.7 713.9 779.1 1,144.9

Other Current Assets 0.0 0.0 0.0 0.0

Total Current Assets 5,457.8 5,934.7 7,757.4 8,522.7

Creditors 1,855.2 1,292.7 2,288.4 2,333.2

Provisions 4.4 4.4 4.4 4.4

Net Current Assets 3,598.2 4,637.6 5,464.7 6,185.2

Deferred Tax Assets 118.1 118.1 118.1 118.1

Total Assets 8,454.1 8,904.8 10,700.1 11,436.7


Key ratios


Per share data (|)

EPS 11.2 12.6 27.7 24.0

Cash EPS 12.6 14.1 29.2 25.6

BV 168.6 179.3 202.9 223.3

Operating profit per share 17.4 20.3 45.4 40.6

Cash Per Share 10.4 21.0 22.9 33.7

Operating Ratios (%)

EBITDA Margin 51.9 53.1 50.1 47.0

PBT / Net Sales 51.2 50.5 47.1 42.9

PAT Margin 34.2 33.8 31.6 28.8

Inventory days 1,252 1,205 597 688

Debtor days 35 42 21 27

Creditor days 618 378 281 302

Return Ratios (%)

RoE 6.6 7.0 13.7 10.7

RoCE 8.6 8.4 17.4 14.4

RoIC 12.4 12.7 25.8 21.6

Valuation Ratios (x)

P/E 43.9 39.0 17.7 20.4

EV / EBITDA 26.9 23.5 10.4 11.4

EV / Net Sales 14.0 12.5 5.2 5.4

Market Cap / Sales 15.2 13.3 5.6 5.9

Price to Book Value 2.9 2.7 2.4 2.2

Solvency Ratios (x)

Debt / EBITDA 1.5 2.3 1.0 1.1

Debt / Equity 0.2 0.2 0.2 0.2

Current Ratio 2.7 4.0 3.0 3.2

Quick Ratio 0.7 0.8 0.9 0.9S

ource: Company, ICICIdirect.com Research


ICICIdirect.com coverage universe (Real Estate)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

Oberoi Realty (OBEREA) 490 490 Hold 16,082 11.2 12.6 27.7 43.9 39.0 17.7 26.9 23.5 10.4 2.9 2.7 2.4 6.6 7.0 13.7

Mahindra Lifespace (GESCOR) 503 570 Buy 2,055 24.9 13.7 21.5 9.8 28.3 25.4 7.5 40.4 48.9 1.4 1.3 1.2 18.0 5.9 6.0

Sobha (SOBDEV) 511 575 Buy 5,011 16.4 20.2 27.0 31.2 25.2 18.9 16.9 13.8 11.4 1.9 1.8 1.7 6.1 7.1 9.0

Sunteck Realty (SUNRE) 390 440 Buy 4,680 14.8 16.9 22.7 16.7 14.7 10.9 12.3 9.2 6.8 1.9 1.3 1.2 11.6 8.9 10.9

P/B (x) RoE (%)

Sector / Company

EPS (|) P/E (x) EV/EBITDA (x)



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february 2, 2018 oberoi realty (oberea) |...

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