oberoi realty (oberea) | 485content.icicidirect.com/mailimages/idirect_oberoirealty_q1fy19.pdf ·...

August 2, 2018

ICICI Securities Ltd | Retail Equity Research

Result Update

Strong all-round performance…

Oberoi Realty's (ORL) sales volumes jumped 118.3% sequentially to

2.86 lakh sq ft (our estimate: 1.65 lakh sq ft) clocking sales value of

| 166.4 crore. Higher-than-expected sales volume of 1.29 lakh sq ft in

‘Esquire’ project (our estimate: 50000 sq ft) primarily led this growth

Revenues grew robustly by 239.0% YoY to | 884.0 crore (our

estimate: | 818.7) crore as SkyCity project (Borivali) hit revenue

recognition threshold during the quarter

EBITDA margin was steady at 52% (our estimate: 45%) due to lower

employee cost (2.1% in Q1FY19 vs. 6.9% Q1FY18)

Net income grew 238.5% YoY to | 309.4 crore (our expectation:

| 244.2 crore) on account of higher-than-expected EBITDA margin

Sales volumes rises phenomenal 118.3% QoQ to 2.86 lakh sq ft…

Oberoi’s sales volumes grew at a phenomenal rate of 118.3% QoQ to 2.86

lakh sq ft (lsf) in Q1FY19 due to the exceptional performance in the

Esquire and Eternia projects. These projects benefited significantly from

the subvention scheme that ORL launched, which was reflected in the

volume numbers. Also, the SkyCity project hit revenue recognition

threshold in Q1FY19. Now, with construction at both Goregaon projects

i.e. Exquisite and Enigma, the company is planning to launch its third

project in the area in FY19E. With launches planned at Thane, Goregaon

and subsequent phases of Borivali and Mulund projects, we expect sales

volumes to grow at a healthy pace of 65.7% CAGR from 0.6 msf in FY18

to 1.5 msf in FY20E.

Raises | 1200 crore through QIP to aid growth…

ORL raised | 1200 crore by allotting 2.4 crore equity shares at

| 500/equity share through QIP on June 21, 2018. The company will

deploy these funds towards acquiring land as a part of its growth plans.

Also, the construction of its ongoing and new projects would be funded

through a mix of internal accruals and debt.

Revenue recognition from new projects to boost bottomline…

SkyCity hit revenue recognition threshold in Q1FY19 while Eternia &

Enigma are near the threshold level. These would start contributing to the

topline and bottomline in FY19E. Consequently, we expect the company

to post healthy topline, PAT growth of 46.5%, 42.0% CAGR to | 2714.7

crore, | 925.6 crore, respectively, in FY18-20E.

Rental portfolio to aid revenue growth…

Commerz II achieved 63.4% occupancy in Q1FY19 (47.4% in Q4FY18).

The management aims to achieve 85-90% occupancy by FY19E end, post

which it would start construction of Commerz III. Also, revenues of Oberoi

mall grew robustly by 32.9% YoY to | 35.4 crore led by upward revision

of rental rates to | 200/ sq ft per month. ORL leased 1 lakh sq ft at its

upcoming Borivali mall (total leasable area: 1.56 msf). ORL is also setting

up a luxury mall with leasable area of ~1 msf in Worli (Glaxo land) along

with a hotel with developable area of ~0.68 msf adjacent to mall.

Await volume improvement at some key projects; maintain HOLD…

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

sheet and management bandwidth to execute large projects. ORL also

showed strong sales performance at Goregaon and Borivali projects.

However, sales performance of Worli & Mulund projects has been below

expectations and we await improvement. We would be closely tracking

volumes at these projects. Consequently, we continue to maintain our

HOLD rating on the stock with a revised target price of | 530.

Rating matrix

Rating : Hold

Target : | 530

Target Period : 12 months

Potential Upside : 9%

What’s Changed?

Target Changed from | 550 to | 530

EPS FY19E Changed from | 24.3 to | 27.1

EPS FY20E Changed from | 21.5 to | 25.5

Rating Unchanged

Quarterly Performance

| crore Q1FY19 Q1FY18 YoY (%) Q4FY18 QoQ (%)

Revenue 884.0 260.7 239.0 344.9 156.3

EBITDA 457.5 135.6 237.5 183.3 149.6

EBITDA (%) 51.7 52.0 -24 bps 53.1 -140 bps

PAT 305.2 91.4 233.9 142.9 113.6

Key Financials

| Crore FY17 FY18 FY19E FY20E

Net Sales 1,113.7 1,265.4 2,926.5 2,714.7

EBITDA 569.9 675.3 1,421.6 1,335.8

Net Profit 378.7 458.8 986.8 925.6

EPS (|) 10.4 12.6 27.1 25.5

Valuation summary

(x) FY17 FY18 FY19E FY20E

P/E 43.5 35.9 16.7 17.8

Target P/E 47.5 39.2 18.2 19.4

EV / EBITDA 28.6 24.7 10.1 10.3

P/BV 3.1 2.9 2.2 2.0

RoNW (%) 6.6 7.5 11.0 9.2

RoCE (%) 8.6 8.5 14.4 12.5

Stock data

Particular Amount (| crore)

Market Capitalization 17,631.5

Total Debt 1,600.0

Cash 2,540.9

EV 16,690.6

52 week H/L (|) 609 / 352

Equity capital 328.2

Face value (|) 10.0

Price performance (%)

Return % 1M 3M 6M 12M

Sunteck Realty (11.3) (7.6) (5.9) 61.7

Oberoi Realty (2.1) 2.3 7.8 30.8

Sobha Ltd (8.8) (12.9) (15.2) 25.0

Mahindra Lifespace 11.5 17.0 13.3 26.3

BSE Realty (9.5) (12.8) (10.8) 7.9

Research Analyst

Deepak Purswani, CFA

[email protected]

Vaibhav Shah

[email protected]

Harsh Pathak

[email protected]

Oberoi Realty (OBEREA) | 485


Variance analysis

[

Q1FY19 Q1FY19E Q1FY18 YoY (Chg %) Q4FY18 QoQ (Chg %) Comments

Income from Operation 884.0 818.7 260.7 239.0 344.9 156.3 Revenues grew robustly on account of strong execution

Other Income 7.1 7.9 9.6 -25.7 7.9 -9.5

Operating Cost 375.5 370.8 97.7 284.1 132.0 184.5

Employee cost 18.6 43.4 18.0 3.5 15.7 18.9

Other expenditure 32.5 35.7 9.4 244.1 14.0 132.0

EBITDA 457.5 368.7 135.6 237.5 183.3 149.6

EBITDA Margin (%) 51.7 45.0 52.0 -24 bps 53.1 -140 bps The EBITDA margin expansion was led by change in project mix

Depreciation 10.6 11.8 12.4 -14.2 11.8 -9.7

Interest 4.9 1.9 1.6 215.4 1.9 161.7

PBT 449.1 362.9 131.2 242.3 177.6 152.9

Taxes 145.0 119.8 40.5 257.6 35.7 305.6

PAT 305.2 244.2 91.4 233.9 142.9 113.6 Robust PAT growth was led by strong topline growth and EBITDA margin

expansion

Source: Company, ICICI Direct Research

Change in estimates

FY20E

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

Revenue 1265.4 2674.1 2926.5 9.4 2532.1 2714.7 7.2 We factor in strong Q1FY19 performance

EBITDA 675.3 1320.6 1421.6 7.7 1204.8 1335.8 10.9

EBITDA Margin (%) 53.4 49.4 48.6 -82 bps 47.6 49.2 161 bps

PAT 458.8 929.1 986.8 6.2 852.3 925.6 8.6

EPS (|) 12.6 27.4 27.1 6.2 25.1 25.5 8.6

FY18 FY19E


Assumptions

FY16 FY17 FY18 FY19E FY19E FY20E FY20E Comments

Volume sold in msf New Earlier New Earlier

Goregaon 0.2 0.1 0.2 0.4 0.3 0.6 0.3

Andheri/Borivali 1.1 0.2 0.2 0.3 0.3 0.4 0.4

Worli 0.0 0.2 0.1 0.1 0.2 0.2 0.3

Mulund 0.0 0.1 0.1 0.1 0.1 0.2 0.1

Pune 0.0 0.0 0.0 0.0 0.1 0.2 0.2

Total 1.3 0.6 0.6 1.0 1.0 1.5 1.3 We upgrade our FY20 estimates given the improvement in

sales momentum

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research


Conference call highlights:

Commerz II update: The company achieved 63.4% occupancy in

Q1FY19 and clocked an average revenue of | 120 psf per month.

The management is further confident on achieving 90-100%

occupancy in FY19E. Upon achieving this target, it will commence

construction of Commerz III instantly

Prisma project: The company has received full occupational

certificate for Prisma project

Esquire project: The subvention scheme panned out well for the

project, which resulted in exceptional sales of 1.29 lakh sq. ft. in

Q1FY19

Malls update: The management expects to launch its luxury Worli

mall with leasable area of ~1 msf by December, 2019. Also, the

company would be constructing its Borivali mall in single stretch

with leasable area of 1.56 msf

Goregaon project: The company is looking to launch Exquisite

Phase III in Goregaon in FY19E. The contract for construction has

been awarded to L&T

Tardeo update: The management indicated that ORL will have to

complete the redevelopment at Tardeo, Mumbai post which it

would develop project on free sale land

Revenue recognition threshold: The company has achieved

threshold for revenue recognition for SkyCity project while Eternia

and Enigma projects are near the threshold. Unlike some other

listed peers, ORL has continued with percentage completion

method for recognizing revenues, as their sales contracts do not

give flexibility for customer to cancel the sale. However, ORL has

adopted two accounting changes:- (a) consideration of only

construction spends to measure threshold of project completion

(excluding land cost), & (b) recognition of revenue without

margins (to the extent of costs incurred) until revenue recognition

threshold have been met


Company Analysis

Sales volumes grow robustly…

ORL’s sales volumes jumped 118.3% QoQ to 2.86 lakh sq ft (lsf) in

Q1FY19 due to exceptional performance in the Esquire and Eternia

projects. The subvention scheme panned out well for ORL resulting in

phenomenal sales volume of 1.29 lsf in ‘Esquire’ project (our estimate: 0.5

lsf). Also, SkyCity project hit revenue recognition threshold in Q1FY19.

Going forward, Eternia & Enigma projects are nearing threshold and will

start contributing to topline & bottomline in FY19E. Furthermore, ORL has

a strong line-up of project launches in FY19E, with launches planned in

subsequent phases of Borivali & Mulund projects and planning to launch

third phase of Goregaon project. Consequently, we expect the sales

volumes to grow from 0.6 msf in FY18 to 1.5 msf in FY20E

Exhibit 1: Sales volume picking up

1.4

7 1.7

7

1.0

6

0.9

8

1.7

3

1.3

1

2.8

7

1.3

5

1.5

2

0.50

1.00

1.50

2.00

2.50

3.00

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

(la

kh s

q f

t)


Exhibit 2: Sales volumes to improve here on…

0.2 0.2 0.1 0.20.4

0.60.0

0.1

0.3

0.4

0.1

0.1

0.2

0.1

0.2

0.0

0.2

0.3

1.0

1.3

0.6 0.6

1.0

1.5

0.2

1.1

0.2

0.0

0.5

1.0

1.5

2.0

FY14 FY15 FY16 FY17 FY18 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

23,5

56

19,1

53

22,6

44

17,2

33

23,4

99

22,6

44

17,0

11

23,4

99

19,6

71

22,6

44

17,5

19

23,4

99

19,4

21

22,6

44

17,6

10

19,6

71

10,000

15,000

20,000

25,000

30,000

Goregaon

(Exquisite)

Goregaon

(Escquire)

Andheri Overall

(|

per s

q f

t)

Q2FY18 Q3FY18 Q4FY18 Q1FY19


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)

FY16 FY17 FY18 FY19E FY20E



Exhibit 5: Ongoing residential projects operational metrics

Particulars Q1FY19 Q4FY18 Q3FY18 Q2FY18 Q1FY18

Area Booked (sq ft)

Oberoi Esquire 129633 42248 24432 50051 21106

Oberoi Exquisite 5070 3640 17550 5330 6890

Three Sixty West 35324 9562 47479 15020 45427

Priviera - - - - -

Prisma 14588 8778 8595 8958 12364

Eternia 30190 6900 6680 21270 13140

Enigma 14005 5360 0 16860 10107

Sky City 57879 54564 47027 55914 26362

Total 286,689 131,052 151,763 173,403 135,396

Sales Value (| crore)

Oberoi Esquire 267.4 92.1 48.1 103.0 38.2

Oberoi Exquisite 12.0 9.0 41.2 12.8 16.2

Three Sixty West 166.4 43.0 214.7 76.1 187.8

Priviera - - - - -

Prisma 26.3 16.1 15.2 16.1 22.3

Eternia 42.3 10.1 10.3 32.1 20.7

Enigma 20.0 8.3 - 25.3 16.9

Sky City 89.1 84.8 76.9 88.0 43.3

Average Realization for the quarter (|/sq ft)

Oberoi Esquire 20,626 21,790 19,671 20,583 18,113

Oberoi Exquisite 23,669 24,670 23,499 23,996 23,556

Three Sixty West 47,112 44,970 45,222 50,646 41,341

Priviera** - - - - -

Prisma 18,049 18,330 17,708 17,962 18,012

Eternia 14,011 14,696 15,359 15,068 15,769

Enigma - - - 14,994 16,721

Sky City 15,389 15,536 16,342 15,740 16,421

Project Completion (%)

Oberoi Esquire 97.4 93.4 88.3 82.2 71.4


Three Sixty West * * * * *

Priviera 100 100 100 100 100

Prisma 82.7 82.7 74.0 62.0 58.1

Eternia * * * * *

Enigma * * * * *

Sky City 26 * * * *

Inventory as on Date (sq ft)


Three Sixty West 1804753 1929009 1938571 1986050 1442777

Priviera ** 0 0 0 0 0

Prisma 45151 59739 68517 77112 89248

Eternia# 243720 273910 280810 287490 311880

Enigma# 417134 431139 436499 436499 455434

Sky City# 632740 690619 745183 792210 880021


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). 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. Recently, it concluded a deal to

lease out ~0.7 lakh sq ft. Overall, the lease revenue is expected to grow

to | 293 crore in FY20E vs. | 204 crore in FY18 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 0.60.5 0.5 0.50.6

0.6

0.5

0.50.6

0.8 0.9 0.80.9

1.0

1.1

1.41.4

0.0

0.3

0.6

0.9

1.2

1.5

FY13 FY14 FY15 FY16 FY17 FY18 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 45 43 48

7497

79 8794 94

100

111

142

147

126135

147 150

173

204

259

293

0

75

150

225

300

FY13 FY14 FY15 FY16 FY17 FY18 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 FY18, it

reported revenue and EBITDA of | 128.7 crore and | 34.5 crore,

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

of | 145.3 crore and | 53.1 crore, respectively, in FY20E.

Exhibit 8: Hotel revenue trend

122.8128.0 126.6 128.7

134.0

145.3

0

35

70

105

140

175

FY15 FY16 FY17 FY18 FY19E FY20E

(|

crore)


Exhibit 9: Westin’s operating profit trend

33.0

41.6

43.6

42.0

46.3

53.1

32.5

26.9

34.5

32.7

34.5

36.5

0.0

15.0

30.0

45.0

60.0

75.0

FY15 FY16 FY17 FY18 FY19E FY20E

(|

crore)

24

27

30

33

36

39(%

)

EBITDA Margins (RHS)



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

Particulars Q1FY19 Q4FY18 Q3FY18 Q2FY18 Q1FY18

Oberoi Mall (Retail Property)

Operating Revenue (| crore) 35.4 29.0 28.0 26.8 26.7

EBITDA margin (%) 94.0 96.5 95.0 73.4 92.7

Occupancy (%) 97.3 99.4 99.4 98.7 99.1

Realisation (|/sqft/month) 220 176 170 164 162

Commerz I (Commercial Space)


EBITDA margin(%) 98.3 109.2 99.0 99.0 99.6

Occupancy (%) 78.5 82.1 82.1 82.1 88.5


Commerz II Phase I (Commercial Space)


EBITDA margin(%) 87.5 84.5 81.5 82.8 84.2

Occupancy (%) 63.4 47.5 44.7 44.7 44.7


The Westin Mumbai Garden City

(Hospitality)


EBITDA margin(%) 34.5 28.2 36.1 31.8 34.5

Average Room Rate (|) 8366 9093 9401 8209 8030

Occupancy (%) 84.3 83.6 80.0 78.0 81.6

RevPAR (|) 7052 7615 7582 6416 6546



Revenues recognised to grow at 46.5% CAGR over FY18-20E…

Revenues grew steadily by 13.6% YoY to | 1265.4 crore in FY18. Going

forward, we expect ORL’s revenues to grow robustly at 46.5% CAGR over

FY18-20E to | 2714.7 crore as its Mulund, Borivali and Worli projects are

expected to hit the 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 46.5% CAGR over FY18-20E…

1,408.1

1,113.7

1,265.4

2,714.72,926.5

500

1000

1500

2000

2500

3000

3500

FY16 FY17 FY18E FY19E FY20E

(|

crore)

CAGR - 46.5%


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 48-50% 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 53.4

48.6 49.2

35

40

45

50

55

60


(%

)


ORL’s revenues are expected to grow at a CAGR of 46.5%

CAGR during FY18-20E


Net profit to grow at 42.0% CAGR during FY18-20E…

Overall, we expect ORL’s bottomline to grow at a CAGR of 42.0% during

FY18-20E to | 925.6 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 42.0% CAGR during FY18-20E

425.9 378.7 458.8 986.8 925.6

0

250

500

750

1000


(|

crore)

CAGR - 42.0%


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 12.5% RoCE and 9.2% RoE in FY20E.

Exhibit 14: Return ratio to bounce back

11.3

8.0

8.6

8.5

14.4

12.5

6.6

7.5

11.0

9.2

0

4

8

12

16


(%

)

RoCE RoNW


We expect ORL’s bottomline to grow at a CAGR of 42.0%

during FY18-20E to | 925.6 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. ORL also

showed strong sales performance at Goregaon and Borivali projects.

However, sales performance of Worli & Mulund projects has been below

expectations and we await improvement. We would be closely tracking

volumes at these projects. Consequently, we continue to maintain our

HOLD rating on the stock with a revised target price of | 530.

Exhibit 15: Valuation

Location Type Status

Saleable Area ( in mn

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

Goregaon 10.1 8,339.0 7,731.7 212.7

Oberoi Mall Retail Completed 0.6 1,787.5 1.0 1,787.5 49.2

Commerz I Commercial Completed 0.4 602.2 1.0 602.2 16.6

Westin Hotel Completed 0.4 1,068.7 1.0 1,068.7 29.4

Exquisite I Residential Ongoing 1.5 259.7 1.0 259.7 7.1

Exquisite II Residential Ongoing 1.5 502.9 1.0 502.9 13.8

Commerz II Phase I Commercial Ongoing 0.7 1,447.9 0.9 1,303.1 35.8

Exquisite III Residential Planned 1.9 1,016.4 1.0 1,016.4 28.0

Commerz II Phase II Commercial Planned 1.7 1,541.9 0.7 1,079.3 29.7

Oberoi International school Social Infrastructure Ongoing 0.3

Education complex Planned 0.9

Hospital Planned 0.4

Andheri/Khar/Borivali 3.1 3,644.1 3,612.2 99.4

Oberoi Maxima Commercial Ongoing 0.3 242.9 0.9 218.6 6.0

Oberoi Prisma Residential Ongoing 0.7 45.0 1.0 45.0 1.2

Oberoi Splendour IT park Commercial Planned 0.1 75.9 0.9 68.3 1.9

Oberoi Splendour school Social Infrastructre Planned 0.4 14.7 1.0 14.7 0.4

Borivali Residential 4.5 3,265.6 1.0 3,265.6 89.8

Worli 3.4 2,505.8 2,069.5 56.9

Oasis Residential Residential Ongoing 2.3 648.7 0.9 583.8 16.1

Oasis Commercial Commercial Ongoing 0.2 244.2 0.8 195.4 5.4

Oasis Mall Retail Ongoing 0.1 111.4 0.8 89.1 2.5

Oasis Hospitality Hospital Ongoing 0.2 191.6 0.8 153.3 4.2

I-Ventures Residential 0.5 1,309.9 0.8 1,047.9 28.8

Thane Residential Planned 10.2 3,490.3 0.9 3,141.3 86.4

Mulund 3.2 1,029.0 1,029.0 28.3

Eternia Residential Ongoing 1.6 441.8 1.0 441.8 12.2

Enigma Residential Ongoing 1.6 587.2 1.0 587.2 16.2

Pune 1.3 126.7 113.3 3.1

Sangam city - Residential Residential Planned 0.8 59.4 1.0 59.4 1.6

Sangam city - Commercial Commercial Planned 0.3 35.8 0.8 28.6 0.8

Sangam city - Retail Retail Planned 0.3 31.6 0.8 25.3 0.7

Net cash/ (Debt) 1,456.1 1.0 1,456.1 40.1

Total 31.4 20,591.1 0.9 19,153.1 527

Rounded off Target price 530

111.9 1.0 111.9 3.1


Exhibit 16: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY17 1113.7 -20.9 10.4 -11.1 46.6 28.6 6.6 8.6

FY18 1265.4 13.6 12.6 21.2 38.4 24.7 7.5 8.5

FY19E 2926.5 131.3 27.1 115.1 17.9 10.1 11.0 14.4

FY20E 2714.7 -7.2 25.5 -6.2 19.0 10.3 9.2 12.5



Recommendation History vs. Consensus

0

150

300

450

600

750

Aug-18May-18Feb-18Nov-17Aug-17May-17Feb-17Nov-16Aug-16Jun-16Mar-16Dec-15Sep-15Jun-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, ICICI Direct 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 acquires 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) 30-Jun-18 58.5% 212.9 0.0

2 R S Estate Developers Pvt. Ltd. 30-Jun-18 9.2% 33.3 0.0

3 Franklin Advisers, Inc. 30-Jun-18 2.6% 9.4 -0.2

4 Franklin Templeton Investment Management Ltd. 30-Jun-18 2.6% 9.3 -1.1

5 APG Asset Management 30-Jun-18 1.6% 6.0 0.3

6 GIC Private Limited 30-Jun-18 1.3% 4.6 4.6

7 OppenheimerFunds, Inc. 30-Jun-18 1.1% 4.2 0.0

8 L&T Investment Management Limited 31-Mar-18 1.1% 4.0 -0.5

9 Wellington Management Company, LLP 30-Jun-18 1.0% 3.7 -0.2

10 BlackRock Asset Management North Asia Limited 31-Mar-18 1.0% 3.7 0.1

(in %) Sep-17 Dec-17 Mar-18 Jun-18

Promoter 72.5 72.5 72.5 67.7

FII 25.4 24.9 22.6 26.4

DII 0.6 0.7 2.9 3.4

Others 1.6 1.8 2.0 2.5

Source: Reuters, ICICI Direct Research

Recent Activity

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

GIC Private Limited 31.8 4.6 BlackRock Investment Management (UK) Ltd. -12.0 -1.5

Reliance Nippon Life Asset Management Limited 8.5 1.2 Franklin Templeton Investment Management Ltd. -7.3 -1.1

APG Asset Management 2.4 0.3 BlackRock Financial Management, Inc. -7.1 -0.9

Norges Bank Investment Management (NBIM) 2.4 0.3 GaveKal Capital Limited -4.5 -0.6

Florida State Board of Administration 1.4 0.2 L&T Investment Management Limited -3.6 -0.5

Buys Sells

Source: Reuters, ICICI Direct Research


Financial summary

Profit and loss statement (| Crore)

(Year-end March) FY17 FY18 FY19E FY20E

Net Sales 1,113.7 1,265.4 2,926.5 2,714.7

Other Operating Income 0.0 0.0 0.0 0.0

Total Operating Income 1,113.7 1,265.4 2,926.5 2,714.7

Growth (%) -20.9 13.6 131.3 -7.2

Operating Costs 428.7 467.9 1,376.4 1,244.1

Employee Expenses 64.2 67.2 70.5 74.0

Other Expenses 51.0 55.1 57.9 60.8

Total Operating Expenditure 543.9 590.1 1,504.8 1,378.9

EBITDA 569.9 675.3 1,421.6 1,335.8

Growth (%) -14.6 18.5 110.5 -6.0

Depreciation 49.5 49.1 52.5 53.7

Interest 5.6 6.9 64.0 96.0

Other Income 47.6 26.6 29.2 32.2

PBT 562.4 645.9 1,334.4 1,218.3

Prior Period Adjustments 0.0 0.0 0.0 0.0

Total Tax 186.9 190.7 440.4 402.0

PAT before profit from associates 375.6 455.2 894.1 816.3

Minoriy Interest 0.0 0.0 0.0 0.0

Profit from associates 3.1 3.6 92.7 109.3

PAT 378.7 458.8 986.8 925.6

EPS (|) 10.4 12.6 27.1 25.5


Cash flow statement (| Crore)


Profit after Tax 378.7 458.8 986.8 925.6

Depreciation 49.5 49.1 52.5 53.7

Interest 71.8 6.9 64.0 96.0

Others -46.2 -26.6 -121.9 -141.5

Net Increase in Current Assets -475.2 -1343.0 -280.5 -46.1

Net Increase in Current Liabilities 190.7 672.8 532.5 -148.0

Net cf from operating activities 173.6 -212.2 1,233.2 739.7

(Purchase)/Sale of Fixed Assets -76.3 -27.9 -25.0 -25.0

Others -46.2 -26.6 -121.9 -141.5

Net cf from Investing Activities -438.9 -601.2 96.9 116.5

Inc / (Dec) in Equity Capital 6.0 0.0 1,200.0 0.0

Inc / (Dec) in Loan Funds -18.0 731.4 0.0 0.0

(Payment) of Dividend & Div. Tax 0.0 -68.8 -148.0 -138.8

Interest paid -52.5 -6.9 -64.0 -96.0

Net cf from Financing Activities 335.6 655.7 988.0 -234.8

Net Cash flow 39.8 -157.8 2,318.1 621.3

Opening Cash/Cash Equivalent 311.9 351.7 116.7 2,434.8

Closing Cash/ Cash Equivalent 351.7 116.7 2,434.8 3,056.1


Balance sheet (| Crore)


Equity Capital 339.5 339.5 363.5 363.5

Preference Capital 0.0 0.0 0.0 0.0

Reserve and Surplus 5,386.4 5,752.8 7,767.5 8,554.3

Total Shareholders funds 5,726.0 6,092.3 8,131.0 8,917.8

Total Debt 868.6 1,600.0 1,600.0 1,600.0

Total Liabilities 8,454 10,225 12,796 13,435

Assets

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

Less Accumulated Depreciation 98.3 91.2 143.7 197.3

Net Block 944.5 976.5 949.1 920.4

Capital WIP 109.5 112.5 112.5 112.5

Total Fixed Assets 1,054.0 1,089.0 1,061.5 1,032.9

Goodwill on consolidation 0.0 0.0 0.0 0.0

Investments 1,824.3 2,424.2 2,424.2 2,424.2

Inventory 3,766.4 4,246.7 4,216.9 4,387.5

Debtors 105.8 181.3 171.7 206.1

Loans and Advances 1,234.0 1,874.9 2,194.8 2,036.0

Cash 351.7 116.7 2,434.8 3,056.1

Other Current Assets 0.0 146.2 146.2 146.2

Total Current Assets 5,457.8 6,565.8 9,164.5 9,831.9

Creditors 1,855.2 2,527.9 3,060.4 2,912.4

Provisions 4.4 4.4 4.4 4.4

Net Current Assets 3,598.2 4,033.5 6,099.7 6,915.1

Deferred Tax Assets 118.1 145.8 145.8 145.8

Total Assets 8,454 10,225 12,796 13,435


Key ratios


Per share data (|)

EPS 10.4 12.6 27.1 25.5

Cash EPS 11.8 14.0 28.6 26.9

BV 157.5 167.6 223.7 245.3

Operating profit per share 15.7 18.6 39.1 36.7

Cash Per Share 9.7 3.2 67.0 84.1

Operating Ratios (%)

EBITDA Margin 51.2 53.4 48.6 49.2

PBT / Net Sales 50.5 51.0 45.6 44.9

PAT Margin 33.7 36.0 30.6 30.1

Inventory days 1,234 1,225 526 590

Debtor days 35 52 21 28

Creditor days 609 730 382 392

Return Ratios (%)

RoE 6.6 7.5 11.0 9.2

RoCE 8.6 8.5 14.4 12.5

RoIC 12.4 12.8 29.7 26.8

Valuation Ratios (x)

P/E 46.6 38.4 17.9 19.0

EV / EBITDA 28.6 24.7 10.1 10.3

EV / Net Sales 14.7 13.2 4.9 5.1

Market Cap / Sales 15.8 13.9 6.0 6.5

Price to Book Value 3.1 2.9 2.2 2.0

Solvency Ratios (x)

Debt / EBITDA 1.5 2.4 1.1 1.2

Debt / Equity 0.2 0.3 0.2 0.2

Current Ratio 2.7 2.5 2.2 2.3

Quick Ratio 0.7 0.9 0.8 0.8S

ource: Company, ICICI Direct Research


ICICI Direct Research coverage universe (Real Estate)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

Oberoi Realty (OBEREA) 485 530 Hold 15,918 10.4 12.6 27.1 46.6 38.4 17.9 28.6 24.7 10.1 3.1 2.9 2.2 6.6 7.5 11.0

Mahindra Lifespace (GESCOR) 525 525 Buy 2,145 24.9 19.5 19.9 10.6 30.7 27.5 7.9 42.4 52.3 1.5 1.4 1.3 18.0 5.9 6.0

Sobha (SOBDEV) 475 550 Hold 4,913 14.1 16.7 22.5 35.6 30.0 22.3 15.7 16.6 13.7 1.9 1.8 1.7 5.4 6.1 7.8

Sunteck Realty (SUNRE) 409 475 Buy 4,910 14.8 15.2 17.8 27.8 27.1 23.1 18.9 16.5 14.5 3.2 2.2 2.0 11.6 8.1 8.8


P/B (x) RoE (%)

Sector / Company

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


RATING RATIONALE

ICICI Direct Research endeavours to provide objective opinions and recommendations. ICICI Direct Research

assigns ratings to its stocks according to their notional target price vs. current market price and then

categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and

the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


ANALYST CERTIFICATION

We /I, Deepak Purswani, CFA MBA (Finance), Vaibhav Shah, MBA (Finance), Harsh Pathak, MBA (Finance); Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report

accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst

with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management,

life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a

significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or

derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may

not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information

herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate

that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to

this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for

informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report

constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable

for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any

recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities

whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before

investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public

offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the

companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of

this report.

It is confirmed that Deepak Purswani, CFA MBA (Finance), Vaibhav Shah, MBA (Finance), Harsh Pathak, MBA (Finance); Research Analysts of this report have not received any compensation from the companies mentioned in the report in the

preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research

report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

It is confirmed that Deepak Purswani, CFA MBA (Finance), Vaibhav Shah, MBA (Finance), Harsh Pathak, MBA (Finance); Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be

contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities

described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

oberoi realty (oberea) | 485content.icicidirect.com/mailimages/idirect_oberoirealty_q1fy19.pdf ·...

Documents