oberoi realty (oberea) | 386content.icicidirect.com/mailimages/idirect_oberoirealty... · 2017. 8....

August 1, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Await recovery in sales volume…

Oberoi Realty's (ORL) Q1FY18 sales performance was below our

expectations due to poor performance in Eternia & Enigma projects.

On the financial front, the result was largely in line with our estimates

ORL's Q1FY18 sales volumes de-grew 27.7% QoQ to 0.97 lakh

square feet (sq ft) (sales value: | 287.0 crore). It was below our

estimate of 1.05 lakh sq ft mainly due to lower-than-expected sales

volume of 3120 sq ft in ‘Eternia’ project (our expectation: 10000 sq ft)

Revenues de-grew 18.5% YoY to | 260.7 crore and was marginally

below our estimate of | 272.9 crore

The EBITDA margin expanded 30 bps YoY to 52.0% mainly on

account of a change in the project mix (our expectation of 49.1%)

Net income de-grew 15.2% YoY to | 91.4 crore and was marginally

above our expectation of | 88.8 crore

Sales volumes adversely impacted amid RERA, GST implementation…

Sales volumes de-grew 27.7% QoQ to 0.97 lakh sq ft in Q1FY18 due to

poor sales performance of some projects amid regulatory changes like

GST, RERA. Going forward, ORL would look to launch subsequent phases

of Borivali and Mulund projects. Also, in FY18E, it is planning to launch

third phase of Goregaon project. The company also expects to complete

construction of the Esquire project by December, 2017 and start giving

possession. It is also looking to sell the remaining inventory in the

Exquisite project in FY18E. Consequently, we build in sales volumes of

1.7 msf in FY19E. Further, with revenue recognition from Borivali, Mulund

and Worli projects, we expect topline, PAT to grow at 55.8%, 50.0%

CAGR to | 2703.4 crore, | 852.1 crore, respectively, in FY17-19E.

ORL files for registration of its projects under RERA…

The company has filed for registration of its projects under Real Estate

Regulatory Authority (RERA) & the management does not expect RERA to

impact their routine operations. It seeks to bring in clarity and fair

practices, which would protect interests of homebuyers and also impose

penalties on errant builders. It would bring in much needed transparency

in the real estate sector while also bringing back consumer’s confidence

into the sector. Hence, ORL being a leading real estate player in the

organised space is set to benefit as RERA would bring in consolidation in

the sector.

Occupancy at Commerz II Phase I improves significantly…

ORL has seen a significant improvement in occupancy over the past few

quarters at Commerz-II Phase I (7 lakh sq ft) with two big deals with Teva

Pharmaceuticals (leased 1 lakh msf) and Samsung India Electronics

(leased ~1.1 lakh sq ft). Consequently, the occupancy has risen from 13%

in Q1FY17 to 44.7% in Q1FY18. Furthermore, the management expects

this momentum to continue, going forward. Overall, we expect lease

revenues to grow to | 226.0 crore in FY19E vs. | 173.0 crore in FY17

driven by the incremental leasing in Commerz II phase I.

Sales volumes continue to remain sluggish; maintain HOLD…

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

sheet and management bandwidth to execute large projects. However,

sales momentum has slowed down in the past few quarters.

Consequently, we await a meaningful pick-up in the sales volumes, going

forward. Hence we continue to maintain our HOLD recommendation on

the stock with a target price of | 385.

Rating matrix

Rating : Hold

Target : | 385

Target Period : 12 months

Potential Upside : 0%

What’s Changed?

Target Unchanged

EPS FY18E Changed from | 25.9 to | 20.9

EPS FY19E Changed from | 27.4 to | 26.0

Rating Unchanged

Quarterly Performance

| crore Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)

Revenue 260.7 320.0 -18.5 289.5 -9.9

EBITDA 135.6 165.4 -18.1 151.5 -10.5

EBITDA (%) 52.0 51.7 30 bps 52.3 -33 bps

PAT 91.4 107.7 -15.2 101.8 -10.2

Key Financials

| Crore FY16 FY17 FY18E FY19E

Net Sales 1,408.1 1,113.7 2,224.5 2,703.4

EBITDA 667.4 570.2 1,085.2 1,315.3

Net Profit 425.9 378.7 685.0 852.1

EPS (|) 13.0 11.5 20.9 26.0

Valuation summary

(x) FY16 FY17E FY18E FY19E

P/E 29.6 33.3 18.4 14.8

Target P/E 29.7 33.4 18.4 14.8

EV / EBITDA 19.2 22.0 11.0 9.1

P/BV 2.4 2.3 2.0 1.8

RoNW (%) 8.0 6.7 11.1 12.3

RoCE (%) 11.0 8.6 15.1 16.9

Stock data

Particular Amount (| crore)

Market Capitalization 12,596.1

Total Debt 901.6

Cash 395.3

EV 13,102.4

52 week H/L (|) 414 / 256

Equity capital 328.2

Face value (|) 10.0

Price performance (%)

Return % 1M 3M 6M 12M

Sunteck Realty 7.5 7.9 97.4 87.0

Mahindra Lifespace 3.5 9.6 29.3 2.6

Oberoi Realty 5.9 (5.7) 21.9 28.4

Sobha Limited 5.2 2.4 54.3 25.0

BSE Realty 5.2 9.0 57.7 34.8

Research Analyst

Deepak Purswani, CFA

[email protected]

Vaibhav Shah

[email protected]

Oberoi Realty (OBEREA) | 386


Variance analysis

[

Q1FY18 Q1FY18E Q1FY17 YoY (Chg %) Q4FY17 QoQ (Chg %) Comments

Income from Operation 260.7 272.9 320.0 -18.5 289.5 -9.9 Revenues grew 18.5% YoY to | 260.7 crore and were largely in line with our

estimate of | 272.9 crore

Other Income 9.6 13.0 10.3 -6.5 12.5 -23.2

Operating Cost 97.7 127.5 124.2 -21.3 109.8 -11.0

Employee cost 18.0 7.3 17.1 5.1 17.0 6.1

Other expenditure 9.4 4.8 12.1 -22.3 11.3 -16.2

EBITDA 135.6 134.0 165.4 -18.1 151.5 -10.5

EBITDA Margin (%) 52.0 49.1 51.7 30 bps 52.3 -33 bps The EBITDA margin expanded 30 bps YoY to 52.0% mainly on account of a

change in the project mix

Depreciation 12.4 13.0 12.3 0.4 12.3 0.9

Interest 1.6 1.4 1.4 13.0 1.4 8.3

PBT 131.2 132.6 162.0 -19.0 150.2 -12.7

Taxes 40.5 43.8 55.3 -26.6 49.2 -17.7

PAT 91.4 88.8 107.7 -15.2 101.8 -10.2 PAT de-grew 15.2% YoY to | 91.4 crore, marginally above our estimates of |

91.4 crore mainly on account of topline decline

Key Metrics

Sales Volume (in sq ft) 97,851 105,000 147,197 -33.5 135,396 -27.7 Sales volume was below our estimates of 1.05 lakh sq ft mainly on account of

lower-than-expected sales volume of 3120 sq ft in ‘Eternia project’ (our

expectation: 10000 sq ft)

Source: Company, ICICIdirect.com Research

Change in estimates

FY19E

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

Revenue 2,584.4 2224.5 -13.9 2836.6 2703.4 -4.7 We have factored in a delay in revenue recognition of a couple of

projects, which has resulted in topline degrade

EBITDA 1,264.5 1085.2 -14.2 1388.0 1315.3 -5.2

EBITDA Margin (%) 48.9 48.8 -12 bps 48.9 48.7 -25 bps

PAT 851.5 685.0 -19.6 900.8 852.1 -5.4

EPS (|) 25.9 20.9 -19.6 27.4 26.0 -5.4

FY18E


Assumptions

FY15 FY16 FY17 FY18E FY18E FY19E FY19E Comments

Volume sold in msf New Earlier New Earlier

Goregaon 0.2 0.2 0.1 0.2 0.4 0.5 0.5

Andheri/Borivali 0.1 1.1 0.2 0.2 0.4 0.5 0.5

Worli 0.0 0.0 0.2 0.2 0.2 0.2 0.2

Mulund 0.7 0.0 0.1 0.1 0.3 0.3 0.3

Pune 0.0 0.0 0.0 0.0 0.2 0.2 0.2

Total 1.0 1.3 0.6 0.7 1.4 1.6 1.7 Given the current environemnt and slowdown in demand, we

reduce our sales volume target in FY18E & FY19E



Conference call highlights:

Zero GST Scheme: The company has launched a zero GST

scheme July 1, 2017 onwards in its Goregaon, Mulund and

Borivali projects. However, it could not negate the impact of GST

in Worli project and expects the price to rise in the hands of

consumers

RERA Update: The company has filed for registration of all its

projects under RERA. The management expects to receive

registration number soon. Until then, the company cannot market

or sell flats in these projects

Project updates: The company has received approval for

additional residential area of 5.3 lakh sq ft in tower A of the Three

Sixty West project and is awaiting height approvals for Tower B. If

the company receives this approval then revenue recognition (RR)

threshold would be pushed to FY19E. Further, the RR threshold

for the Mulund projects depends on the pace of construction. The

company also expects to complete construction of Esquire

project by December, 2017 and start giving possession. It is also

looking to sell the remaining inventory in the Exquisite project in

FY18E. The management also expects the Borivali project to hit

revenue recognition threshold in FY18E

New launches: The company is looking to launch Phase III of

Goregaon Project in FY18


Company Analysis

Sales volumes to remain under pressure…

Sales volumes de-grew 27.7% sequentially to 0.97 lakh sq ft. It was below

our estimate of 1.05 lakh sq ft. on account of lower-than-expected sales

volume of 3120 sq ft in ‘Eternia project’ (our expectation: 10000 sq ft) and

sales volumes of 2075 sq ft in Enigma project (our expectation: 10000 sq

ft). Furthermore, sales value was at | 287.0 crore for Q1FY18. For FY17E,

sales volumes were at 0.6 msf. Going forward, we expect sales volumes

to increase to 1.6 msf in FY19E.

Exhibit 1: Sales volume picking up

0.8

0.6

10.2

1.4

7

1.7

7

1.3

5

0.9

8

1.4

1.0

6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

(la

kh s

q f

t)

Source: Company, ICICIdirect.com, Research

Exhibit 2: Sales volumes to remain under pressure

0.2 0.2 0.2 0.1 0.2

0.5

0.1

0.0

0.2

0.5

0.2

0.2

0.2

0.1

0.3

0.0

0.2

0.5

0.3

1.0

1.3

0.6

0.7

1.6

0.40.1

0.0

1.1

0.0

0.5

1.0

1.5

2.0

FY13 FY14 FY15 FY16 FY17E FY18E FY19E(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

24,0

78

21,3

05

21,5

12

16,8

56

24,2

31

21,5

12

16,6

23

24,2

31

19,1

53

21,5

12

16,4

50

24,2

31

19,9

87

22,6

44

18,5

38

19,1

53

10,000

15,000

20,000

25,000

30,000

Goregaon

(Exquisite)

Goregaon

(Escquire)

Andheri Overall

(|

per s

q f

t)

Q2FY17 Q3FY17 Q4FY17 Q1FY18


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 s

q f

t)

FY15 FY16 FY17E FY18E FY19E



Exhibit 5: Ongoing residential projects operational metrics

Particulars Q1FY18 Q4FY17 Q3FY17 Q2FY17 Q1FY17 Q4FY16

Area Booked (sq ft)

Oberoi Esquire 21106 21106 28016 16920 8008 22610

Oberoi Exquisite 6890 6890 1820 25102 18220 14430

Three Sixty West 45427 45427 28686 68288 55320 -

Priviera - - - - - 2350

Prisma 12364 12364 2602 11395 20188 5204

Eternia 13140 13140 6240 15380 5010 6680

Enigma 10107 10107 3070 10720 13477 7476

Sky City 26362 26362 35780 28514 26974 83257

Total 135,396 135,396 106,214 177,306 147,197 142,007

Sales Value (| crore)

Oberoi Esquire 38.2 38.2 53.7 53.5 16.79 46.43

Oberoi Exquisite 16.2 16.2 4.4 40.7 40.09 37.67

Three Sixty West 187.8 187.8 131.1 300.6 237.41 -

Priviera - - - - - 15.26

Prisma 22.3 22.3 4.5 19.5 34.8 8.76

Eternia 20.7 20.7 9.9 23.7 8.3 10.84

Enigma 16.9 16.9 5.3 17.8 22.58 11.98

Sky City 43.3 43.3 58.6 45.8 46.32 133.61

Average Realization for the quarter (|/sq ft)

Oberoi Esquire 18,113 18,113 19,153 31,608 20,967 20,535

Oberoi Exquisite 23,556 23,556 24,231 16,230 22,003 26,105

Three Sixty West 41,341 41,341 45,691 44,024 42,916 -

Priviera** - - - - - 64,936

Prisma 18,012 18,012 17,333 17,139 17,238 16,833

Eternia 15,769 15,769 15,817 15,403 16,567 16,228

Enigma 16,721 16,721 17,296 16,576 16,754 16,025

Sky City 16,421 16,421 16,383 16,048 17,172 16,048

Project Completion (%)

Oberoi Esquire 71.4 71.4 63.8 57.3 52.86 43.3


Three Sixty West * * * * * *

Priviera 100 100 100 100 100 100

Prisma 58.1 58.1 55.8 53.9 50.48 44.4

Eternia * * * * * *

Enigma * * * * * *

Sky City * * * * * *

Inventory as on Date (sq ft)


Three Sixty West 1442777 1471463 1488204 1516890 1585178 1640498

Priviera ** 0 2350 2350 2350 2350 2350

Prisma 89248 91850 101612 104214 115609 135797

Eternia# 311880 318120 325020 331260 346640 351650

Enigma# 455434 458504 465541 468611 479331 492808

Sky City# 880021 915801 906383 942163 970677 1030295


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 | 226.0 crore in FY19E 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

0.40.50.5 0.5 0.5 0.5

0.50.5

0.5

0.50.8 0.8 0.9 0.9

0.91.0

1.2

1.4

0.0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E

(m

n s

q f

t)

Commerz I Commerz II Phase I Oberoi Mall


Exhibit 7: Leasing revenue trend

44 46 48 47 47 46 45 43

557778 79 87

94 94

100

104

105122 126

135147 150

173

204

226

0

75

150

225

300

FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E

(|

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. In Q1FY18, it reported revenue of | 30.1 crore and EBITDA

margin of 34.5% with occupancy rate of 81.6%. Going ahead, we expect

it to post a topline and bottomline of | 144.5 crore and | 49.8 crore,

respectively, in FY19E.

Exhibit 8: Hotel revenue trend

112.7

122.8128.0 126.6

134.7

144.5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

FY14 FY15 FY16 FY17 FY18E FY19E

(|

crore)


Exhibit 9: Westin’s operating profit trend

34.2

33.0

41.6

43.6

46.5

49.8

26.9

30.3

32.534.5

34.5 34.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

FY14 FY15 FY16 FY17 FY18E FY19E

(|

crore)

24

27

30

33

36

(%

)

EBITDA Margins (RHS)



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

Particulars Q1FY18 Q4FY17 Q3FY17 Q2FY17 Q1FY17

Oberoi Mall (Retail Property)

Operating Revenue (| crore) 26.7 25.7 25.3 24.7 24.4

EBITDA margin (%) 92.7 93.3 93.9 93.6 92.6

Occupancy (%) 99.1 99.7 99.9 90.9 90.8

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

Commerz I (Commercial Space)


EBITDA margin(%) 99.6 99.5 98.8 100.3 99.2

Occupancy (%) 88.5 88.5 88.5 88.5 88.5


Commerz II Phase I (Commercial Space)


EBITDA margin(%) 84.2 80.4 68.4 49.6 41.6

Occupancy (%) 44.7 29.9 29.9 27.1 13.0


The Westin Mumbai Garden City

(Hospitality)


EBITDA margin(%) 34.5 38.9 39.4 28.8 29.2

Average Room Rate (|) 8030 8532 8889 8226 8166

Occupancy (%) 81.6 85.7 81.5 75.0 77.3

RevPAR (|) 6546 7312 7255 6173 6310



Revenues recognised to grow at 55.8% CAGR over FY17-19E…

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 55.8% CAGR over FY17-19E to | 2703.4 crore as its Mulund, Borivali

and Worli projects are expected to hit revenue recognition threshold in

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

recognised from completed projects such as Oberoi Exquisite.

Exhibit 11: Revenues to grow at 55.8% CAGR over FY17-19E…

922.7

1,408.1

1,113.7

2,703.4

2,224.5

500

1000

1500

2000

2500

3000

3500

FY15 FY16 FY17 FY18E FY19E

(|

crore)

CAGR - 55.8%


EBITDA margin to rise marginally…

The EBITDA margin has dropped significantly in FY16 to 47.7%. 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 48-49% 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

55.8

47.4

51.248.8

48.7

35

40

45

50

55

60


(%

)


ORL’s revenues are expected to grow at a CAGR of 55.8%

CAGR during FY17-19E


Net profit to grow at 50.0% CAGR during FY17-19E…

Overall, we anticipate ORL’s bottomline will grow at a CAGR of 50.0%

during FY17-19E to | 852.1 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 50.0% CAGR during FY17-19E

317.8 425.9 378.7 685.0 852.1

0

250

500

750

1000


(|

crore)

CAGR - 50.0%


Return ratio to bounce back in FY19E…

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 16.9% RoCE and 12.3% RoE in FY19E.

Exhibit 14: Return ratio to bounce back

8.8

6.9

11.0

8.6

15.1

16.9

8.0

6.7

11.1

12.3

0

4

8

12

16

20

FY15 FY16 FY17E FY18E FY19E

(%

)

RoCE RoNW


We expect ORL’s bottomline to grow at a CAGR of 50.0%

during FY17-19E to | 852.1 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. However,

sales momentum has slowed down in the past few quarters.

Consequently, we await a meaningful pick-up in the sales volumes, going

forward. Hence we continue to maintain our HOLD recommendation on

the stock with a target price of | 385.

Exhibit 15: Valuation

Location Type Status

Saleable Area ( in mn

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

Goregaon 10.1 6,075.4 5,934.4 175.0

Oberoi Mall Retail Completed 0.6 1,133.4 1.0 1,133.4 33.4

Commerz I Commercial Completed 0.4 479.1 1.0 479.1 14.1

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

Exquisite II Residential Ongoing 1.5 790.3 1.0 790.3 23.3

Commerz II Phase I Commercial Ongoing 0.7 940.6 0.9 799.5 23.6

Exquisite III Residential Planned 1.9 53.8 1.0 53.8 1.6

Commerz II Phase II Commercial Planned 1.7 1,293.4 1.0 1,293.4 38.1

Oberoi International school Social Infrastructure Ongoing 0.3

Education complex Planned 0.9

Hospital Planned 0.4

Andheri/Khar/Borivali 3.1 3,432.8 3,405.1 100.4

Oberoi Maxima Commercial Ongoing 0.3 209.6 0.9 188.7 5.6

Oberoi Prisma Residential Ongoing 0.7 110.5 1.0 110.5 3.3

Oberoi Splendour IT park Commercial Planned 0.1 68.1 0.9 61.3 1.8

Oberoi Splendour school Social Infrastructre Planned 0.4 14.7 1.0 14.7 0.4

Borivali Residential 4.5 3,019.8 1.0 3,019.8 89.0

Worli 3.4 2,007.8 1,712.4 50.5

Oasis Residential Residential Ongoing 2.3 530.9 1.0 530.9 15.7

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

Mulund 3.2 1,369.9 1,369.9 40.4

Eternia Residential Ongoing 1.6 652.2 1.0 652.2 19.2

Enigma Residential Ongoing 1.6 717.8 1.0 717.8 21.2

Pune 1.3 77.6 71.0 2.1

Sangam city - Residential Residential Planned 0.8 44.5 1.0 44.5 1.3

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) 563.8 1.0 563.8 16.6

Total 21.2 13,527.4 1.0 13,056.6 385

Rounded off Target price 385

111.9 1.0 111.9 3.3


Exhibit 16: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY16 1399.7 53.7 13.0 34.0 29.6 19.2 8.0 11.0

FY17E 1107.6 -20.9 11.5 -11.1 33.3 22.0 6.7 8.6

FY18E 2217.7 100.2 20.9 80.9 18.4 11.0 11.1 15.1

FY19E 2695.9 21.6 26.0 24.4 14.8 9.1 12.3 16.9



Recommendation History vs. Consensus

100

200

300

400

500

Aug-17May-17Mar-17Dec-16Oct-16Jul-16May-16Mar-16Dec-15Oct-15Jul-15

(|

)

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

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-16Oberoi 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


Top 10 Shareholders Shareholding Pattern

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

1 Oberoi (Vikas Ranvir) 30-Jun-17 62.7% 212.9 0.0

2 R S Estate Developers Pvt. Ltd. 30-Jun-17 9.8% 33.3 0.0

3 Franklin Templeton Investment Management Ltd. 30-Jun-17 3.0% 10.3 2.9

4 Franklin Advisers, Inc. 30-Jun-17 3.0% 10.3 0.0

5 Aranda Investments (Mauritius) Pte. Ltd. 30-Jun-17 2.7% 9.2 -3.2

6 APG Asset Management 30-Jun-17 1.7% 5.6 0.0

7 BlackRock Investment Management (UK) Ltd. 31-Mar-17 1.5% 4.9 4.9

8 OppenheimerFunds, Inc. 30-Jun-16 1.4% 4.8 1.1

9 Wellington Management Company, LLP 30-Jun-17 1.1% 3.8 -0.2

10 The Vanguard Group, Inc. 30-Jun-17 0.8% 2.7 0.0

(in %) Sep-16 Dec-16 Mar-17 Jun-17

Promoter 72.54 72.53 72.5 72.5

FII 24.23 25.35 25.35 25.35

DII 0.51 0.31 0.57 0.57

Others 2.72 1.81 1.57 1.57

Source: Reuters, ICICIdirect.com Research

Recent Activity

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

BlackRock Investment Management (UK) Ltd. 28.1 4.9 Aranda Investments (Mauritius) Pte. Ltd. -18.0 -3.2

Franklin Templeton Investment Management Ltd. 16.3 2.9 Alpine Woods Capital Investors, LLC -1.3 -0.3

Desjardins Global Asset Management 3.5 0.8 Wellington Management Company, LLP -0.8 -0.2

GaveKal Capital Limited 3.7 0.6 J.P. Morgan Asset Management (Hong Kong) Ltd. -0.8 -0.1

BI Asset Management Fondsmæglerselskab A/S 1.6 0.3 Wellington International Management Company Pte. Ltd. -0.8 -0.1

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement (| Crore)

(Year-end March) FY16 FY17 FY18E FY19E

Net Sales 1,399.7 1,107.6 2,217.7 2,695.9

Other Operating Income 8.4 6.2 6.8 7.5

Total Operating Income 1,408.1 1,113.7 2,224.5 2,703.4

Growth (%) 52.6 -20.9 99.7 21.5

Operating Costs 629.7 437.1 1,020.7 1,263.2

Employee Expenses 57.6 64.2 67.4 70.7

Other Expenses 53.3 42.3 44.5 46.7

Total Operating Expenditure 740.6 543.6 1,132.5 1,380.6

EBITDA 659.1 564.0 1,085.2 1,315.3

Growth (%) 28.1 -15.5 90.3 21.2

Depreciation 49.0 49.5 51.9 37.8

Interest 0.2 5.6 62.9 62.9

Other Income 36.2 47.3 52.0 57.2

PBT 654.5 562.4 1,022.4 1,271.8

Prior Period Adjustments 0.0 0.0 0.0 0.0

Total Tax 228.6 186.9 337.4 419.7

PAT before profit from associates 425.9 375.6 685.0 852.1

Minoriy Interest 0.0 0.0 0.0 0.0

Profit from associates 0.0 3.1 0.0 98.1

PAT 425.9 378.7 685.0 852.1

EPS (|) 13.0 11.5 20.9 26.0


Cash flow statement (| Crore)

(Year-end March) FY16 FY17E FY18E FY19E

Profit after Tax 425.9 378.7 685.0 852.1

Depreciation 49.0 49.5 51.9 37.8

Interest 71.7 5.6 62.9 62.9

Others -23.8 -47.3 -52.0 -57.2

Net Increase in Current Assets -428.6 53.9 -296.1 -811.9

Net Increase in Current Liabilities 329.1 -49.7 278.8 89.1

Net cf from operating activities 426.7 390.6 730.5 172.8

(Purchase)/Sale of Fixed Assets -46.5 -25.0 -25.0 -25.0

Others -23.8 -47.3 -52.0 -57.2

Net cf from Investing Activities -243.4 -127.7 27.0 32.2

Inc / (Dec) in Equity Capital 325.8 0.0 0.0 0.0

Inc / (Dec) in Loan Funds -260.0 350.0 0.0 0.0

(Payment) of Dividend & Div. Tax -160.7 -87.1 -102.7 -127.8

Interest paid -86.2 -5.6 -62.9 -62.9

Net cf from Financing Activities -181.2 257.3 -165.7 -190.8

Net Cash flow 2.1 520.3 591.8 14.3

Opening Cash/Cash Equivalent 293.7 320.9 841.1 1,432.9

Closing Cash/ Cash Equivalent 320.9 841.1 1,432.9 1,447.2


Balance sheet (| Crore)


Equity Capital 339.3 339.3 339.3 339.3

Preference Capital 0.0 0.0 0.0 0.0

Reserve and Surplus 4,965.0 5,256.6 5,838.8 6,563.1

Total Shareholders funds 5,304.3 5,595.9 6,178.1 6,902.4

Total Debt 641.5 991.5 991.5 991.5

Deferred Tax Liability 22.9 22.9 22.9 22.9

Total Liabilities 5,968.7 6,610.3 7,192.5 7,916.8

Assets

Gross Block 1,185.5 1,210.5 1,235.5 1,260.5

Less Accumulated Depreciation 208.3 257.8 309.7 347.6

Net Block 977.1 952.6 925.7 912.9

Capital WIP 53.9 53.9 53.9 53.9

Total Fixed Assets 1,031.0 1,006.5 979.7 966.8

Goodwill on consolidation 265.4 265.4 265.4 265.4

Investments 74.4 224.4 224.4 224.4

Inventory 3,930.6 4,206.9 4,477.2 4,901.8

Debtors 117.0 119.3 143.1 171.7

Loans and Advances 1,993.7 1,661.4 1,663.3 2,021.9

Cash 320.9 841.1 1,432.9 1,447.2

Other Current Assets 26.7 26.7 26.7 26.7

Total Current Assets 6,388.9 6,855.3 7,743.2 8,569.4

Creditors 1,786.7 1,737.0 2,015.8 2,104.9

Provisions 4.4 4.4 4.4 4.4

Net Current Assets 4,597.8 5,113.9 5,723.0 6,460.1

Deferred Tax Assets 0.0 0.0 0.0 0.0

Total Assets 5,968.7 6,610.3 7,192.5 7,916.8


Key ratios


Per share data (|)

EPS 13.0 11.5 20.9 26.0

Cash EPS 14.5 13.0 22.4 27.1

BV 161.6 170.5 188.2 210.3

Operating profit per share 20.3 17.4 33.1 40.1

Cash Per Share 9.8 25.6 43.7 44.1

Operating Ratios (%)

EBITDA Margin 47.7 51.5 48.9 48.8

PBT / Net Sales 46.8 50.8 46.1 47.2

PAT Margin 30.4 33.9 30.9 31.6

Inventory days 1,025 1,386 737 664

Debtor days 31 39 24 23

Creditor days 467 574 332 286

Return Ratios (%)

RoE 8.0 6.7 11.1 12.3

RoCE 11.0 8.6 15.1 16.9

RoIC 11.2 9.5 18.9 20.6

Valuation Ratios (x)

P/E 29.6 33.3 18.4 14.8

EV / EBITDA 19.2 22.0 11.0 9.1

EV / Net Sales 9.2 11.3 5.4 4.4

Market Cap / Sales 9.0 11.4 5.7 4.7

Price to Book Value 2.4 2.3 2.0 1.8

Solvency Ratios (x)

Debt / EBITDA 1.0 1.7 0.9 0.8

Debt / Equity 0.1 0.2 0.2 0.1

Current Ratio 3.4 3.5 3.1 3.4

Quick Ratio 1.2 1.0 0.9 1.1



ICICIdirect.com coverage universe (Real Estate)

CMP M Cap

(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E

Oberoi Realty (OBEREA) 386 385 Hold 12,669 13.0 11.5 20.9 29.6 33.3 18.4 19.2 22.0 11.0 2.4 2.3 2.0 8.0 6.7 11.1

Mahindra Lifespace (GESCOR) 426 520 Buy 1,740 22.7 13.9 33.2 15.6 25.5 10.7 17.2 10.0 5.9 0.9 0.9 0.9 6.0 3.6 8.0

Sobha (SOBDEV) 416 450 Hold 4,006 24.3 14.1 16.4 17.1 29.5 25.4 9.6 14.0 14.7 1.7 1.6 1.5 9.8 5.4 6.0

Sunteck Realty (SUNRE) 238 285 Buy 3,417 1.4 17.3 21.1 175.0 13.7 11.3 163.5 10.5 8.5 1.8 1.6 1.4 1.0 11.6 12.6

P/B (x) RoE (%)

Sector / Company

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



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