oberoi realty (oberea) | 398content.icicidirect.com/mailimages/idirect_oberoirealty_q4fy17.pdf ·...

May 8, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Ends year with better sales volumes…

Oberoi Realty's (ORL) Q4FY17 sales volumes grew 27.5%

sequentially to 1.35 lakh sq ft with sales value of | 345.4 crore. Sales

volumes were above our estimates of 1.23 lakh sq ft mainly on

account of higher-than-expected sales volume of 45427 sq ft in

‘Three Sixty West’ project (our expectation: 25000 sq ft)

Revenues grew 27.7% YoY to | 289.5 crore, in line with our estimate

of | 288.3 crore

The EBITDA margin expanded 680 bps YoY to 52.3% mainly on

account of a change in the project mix (our expectation of 48.7%)

Net income grew 57.7% YoY to | 101.8 crore, marginally above our

expectation of | 93.9 crore

The board of directors of the company have recommended a

dividend of | 2 per share for FY17

Posts strong sales volume growth in Q4FY17…

ORL’s sales volumes grew robustly at 27.7% QoQ to 1.35 lakh sq ft in

Q4FY17 on account of strong sales performance across projects. Sales

volumes were boosted by Three Sixty West and Prisma projects where it

managed to sell 45427 sq ft & 12364 sq ft, respectively. For FY17, the

company managed to clock sales volumes of 0.6 msf vs. 1.3 msf in FY16

due to demonetisation impact and absence of any new launches. With a

strong performance in Q4FY17, the management believes demonetisation

has turned out to be a non-event and expects a demand revival. Going

forward, the company would look to launch subsequent phases of

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

third phase of the Goregaon project. Consequently, we have built in sales

volumes of 1.7 msf in FY19E. Further, with revenue recognition from

newly launched projects, we expect topline, PAT to grow at 59.6%, 54.2%

CAGR to | 2836.6 crore, | 900.8 crore, respectively, in FY17-19E.

RERA to bring in consolidation in sector…

RERA has been implemented from May 1, 2017 in Maharashtra. RERA

seeks to bring clarity and fair practices that would protect the interests of

buyers and also impose penalties on errant builders. It would bring in

much needed transparency in the real estate sector and also consumer’s

confidence back into the sector. Though there could be some near term

hiccups during the transition phase towards RERA, over the long term, it

would benefit organised players like Oberoi as it would lead to

consolidation in the sector. Further, the management felt that RERA

implementation would not impact their routine operations.

Looking to commence operations at new malls by 2019-20…

ORL is looking to set up new malls in Worli and Borivali area. In Worli, the

company is planning a mixed use development of 1 mn sq ft (msf) on the

Glaxo land, which includes a luxury mall over 0.5 msf and a hotel and

some residential plots over the remaining area. The decision to develop

malls comes in the backdrop of success of existing malls in the region

and the demand for quality space from various brands. It is looking to

start operations at the Worli mall by 2019-20 and for hotel by 2019.

Await pick-up in sales volumes; maintain HOLD…

We like ORL given the quality of land bank, its healthy balance sheet &

management bandwidth to execute large projects. Though sales volumes

look strong sequentially, we await a meaningful pick-up in sales volumes,

going forward. Further, the recent rally in the stock (up ~21% in past

three months) leaves no room for upside. Hence, we continue to maintain

our HOLD recommendation on the stock with revised TP of | 385.

Rating matrix

Rating : Hold

Target : | 385

Target Period : 12 months

Potential Upside : -3%

What’s Changed?

Target Changed from | 333 to | 385

EPS FY18E Changed from | 26.3 to | 25.9

EPS FY18E Introduced at | 27.4

Rating Unchanged

Quarterly Performance

| crore Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)

Revenue 289.5 226.7 27.7 252.2 14.8

EBITDA 151.5 103.2 46.8 126.3 19.9

EBITDA (%) 52.3 45.5 680 bps 50.1 224 bps

PAT 101.8 64.6 57.7 84.3 20.8

Key Financials

| Crore FY16 FY17E FY18E FY19E

Net Sales 1,408.1 1,113.7 2,584.4 2,836.6

EBITDA 667.4 570.2 1,264.5 1,388.0

Net Profit 425.9 378.7 851.5 900.8

EPS (|) 13.0 11.5 25.9 27.4

Valuation summary

(x) FY16 FY17E FY18E FY19E

P/E 30.7 34.5 15.3 14.5

Target P/E 29.7 33.4 14.8 14.0

EV / EBITDA 19.9 22.8 9.7 8.8

P/BV 2.5 2.3 2.1 1.8

RoNW (%) 8.0 6.7 12.7 12.7

RoCE (%) 11.0 8.6 17.2 17.4

Stock data

Particular Amount (| crore)

Market Capitalization 13,063.9

Total Debt 901.6

Cash 395.3

EV 13,570.2

52 week H/L (|) 414 / 256

Equity capital 328.2

Face value (|) 10.0

Price performance (%)

Return % 1M 3M 6M 12M

Oberoi Realty 7.2 20.8 17.8 50.4

Sobha Limited 2.0 50.6 56.2 36.4

BSE Realty 17.0 34.7 34.3 47.0

Research Analyst

Deepak Purswani, CFA

[email protected]

Vaibhav Shah

[email protected]

Oberoi Realty (OBEREA) | 398


Variance analysis

[

Q4FY17 Q4FY17E Q4FY16 YoY (Chg %) Q3FY17 QoQ (Chg %) Comments

Income from Operation 289.5 288.3 226.7 27.7 252.2 14.8 Revenues grew 27.7% YoY to | 289.5 crore and were in line with our estimate

of | 288.3 crore

Other Income 12.5 12.7 10.6 17.3 12.7 -1.7

Operating Cost 109.8 109.6 96.0 14.4 99.7 10.2

Employee cost 17.0 13.0 14.4 17.9 17.3 -1.6

Other expenditure 11.3 10.3 13.1 -14.3 9.0 25.3

EBITDA 151.5 140.5 103.2 46.8 126.3 19.9

EBITDA Margin (%) 52.3 48.7 45.5 680 bps 50.1 224 bps The EBITDA margin expanded 680 bps YoY to 52.3% mainly on account of a

change in the project mix

Depreciation 12.3 12.5 12.2 0.4 12.5 -1.8

Interest 1.4 1.5 0.1 1,957.1 1.5 -3.4

PBT 150.2 139.2 101.6 47.9 125.0 20.2

Taxes 49.2 45.3 37.0 33.1 40.7 21.0

PAT 101.8 93.9 64.6 57.7 84.3 20.8 PAT grew robustly at 57.7% YoY to | 101.8 crore, marginally above our

estimates of | 93.9 crore

Key Metrics

Sales Volume (in sq ft) 135,396 122,500 142,994 -5.3 106,214 27.5 Sales volume was above our estimates of 1.23 lakh sq ft mainly on account of

higher-than-expected sales volume of 45427 sq ft in ‘Three Sixty West project’

(our expectation: 25000 sq ft)

Source: Company, ICICIdirect.com Research

Change in estimates

FY19E

(| Crore) Old New % Change Introduced Comments

Revenue 1,113.7 2,587.4 2584.4 -0.1 2836.6 We have marginally tweaked our FY18E assumptions and introduced FY19E

numbers

EBITDA 570.2 1,311.9 1264.5 -3.6 1388.0

EBITDA Margin (%) 51.2 50.7 48.9 -177 bps 48.9

PAT 378.7 863.8 851.5 -1.4 900.8

EPS (|) 11.5 26.3 25.9 -1.4 27.4

FY17 FY18E


Assumptions

FY15 FY16 FY17 FY18E FY18E FY19E Comments

Volume sold in msf New Earlier Introduced

Goregaon 0.2 0.2 0.1 0.3 0.4 0.5

Andheri/Borivali 0.1 1.1 0.2 0.3 0.4 0.5

Worli 0.0 0.0 0.2 0.2 0.2 0.2

Mulund 0.7 0.0 0.1 0.2 0.3 0.3

Pune 0.0 0.0 0.0 0.0 0.2 0.2

Total 1.0 1.3 0.6 0.9 1.4 1.7 We have introduced FY19E estimates at 1.7 msf



Conference call highlights:

Project updates: The company received approvals for an

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

Sixty West project. Further, the management expects the Mulund

projects to hit the revenue recognition threshold probably by

FY18E end. The company also expects to complete construction

of Esquire project by December, 2017. It is also looking to sell the

remaining inventory in the Exquisite project in the next three

quarters. The management also expects the Worli project to hit

revenue recognition threshold

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

Goregaon Project in FY18

New mall on Glaxo land: In Worli, the company is planning a

mixed development of 1 msf on Glaxo land, which includes a

luxury mall over 0.5 msf & a five star hotel and some residential

plots over the remaining area. It is looking to start the operations

at mall by 2019-20 and hotel by 2019

Samsung Deal: Samsung India Electronics has leased ~1.1 lakh

sq ft space (four additional floors) in Oberoi Commerz II Phase I in

Goregaon

Demonetisation impact: The management believes that

demonetisation has turned out to be a non-event for the company


Company Analysis

Sales volumes to remain under pressure…

Sales volumes grew 27.7% sequentially to 1.35 lakh sq ft. They were

above our estimates of 1.23 lakh sq ft on account of higher-than-expected

sales volume of 45427 sq ft in ‘Three Sixty West project’ (our expectation:

25000 sq ft) and sales volumes of 12364 sq ft in Prisma project (our

expectation: 2500 sq ft). Furthermore, sales value was at | 345.4 crore for

Q4FY17. For FY17E, sales volumes were at 5.56 lakh sq ft. Going forward,

the company would look to launch subsequent phases of Borivali and

Mulund projects. Also, in FY18E, it is planning to launch the third phase of

the Goregaon project. Consequently, we have built in sales volumes of

1.7 msf in FY19E.

Exhibit 1: Sales volume picking up

7.5

0.8

0.6 1

.4

1.5

1.0

6

1.3

5

10.2

1.7

7

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

(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 0.10.3

0.5

0.1

0.0

0.3

0.5

0.2

0.2

0.2

0.2

0.3

0.0

0.2

0.5

0.3

1.0

1.3

0.6

0.9

1.7

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 impact overall realisation…

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

22,0

03

20,9

67

21,5

12

16,7

152

4,0

78

21,5

12

16,8

562

4,2

31

19,1

53

21,5

12

16,6

23

24,2

31

19,1

53

21,5

12

16,4

5021,3

05

10,000

15,000

20,000

25,000

Goregaon

(Exquisite)

Goregaon

(Escquire)

Andheri Overall

(|

per s

q f

t)

Q1FY17 Q2FY17 Q3FY17 Q4FY17


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 Q4FY17 Q3FY17 Q2FY17 Q1FY17 Q4FY16 Q3FY16

Area Booked (sq ft)

Oberoi Esquire 21106 28016 16920 8008 22610 28,035

Oberoi Exquisite 6890 1820 25102 18220 14430 13,475

Three Sixty West 45427 28686 68288 55320 - 9,562

Priviera - - - - 2350 4,700

Prisma 12364 2602 11395 20188 5204 12,151

Eternia 13140 6240 15380 5010 6680 1,890

Enigma 10107 3070 10720 13477 7476 6,140

Sky City 26362 35780 28514 26974 83257 947,037

Total 135,396 106,214 177,306 147,197 142,007 1,023,977

Sales Value (| crore)

Oberoi Esquire 38.2 53.7 53.5 16.79 46.43 64.3

Oberoi Exquisite 16.2 4.4 40.7 40.09 37.67 31.9

Three Sixty West 187.8 131.1 300.6 237.41 - 40

Priviera - - - - 15.26 33.6

Prisma 22.3 4.5 19.5 34.8 8.76 22.0

Eternia 20.7 9.9 23.7 8.3 10.84 3.2

Enigma 16.9 5.3 17.8 22.58 11.98 9.3

Sky City 43.3 58.6 45.8 46.32 133.61 1567.15

Average Realization for the quarter (|/sq ft)

Oberoi Esquire 18,113 19,153 31,608 20,967 20,535 22,925

Oberoi Exquisite 23,556 24,231 16,230 22,003 26,105 23,644

Three Sixty West 41,341 45,691 44,024 42,916 - 41,832

Priviera** - - - - 64,936 71,532

Prisma 18,012 17,333 17,139 17,238 16,833 18,106

Eternia 15,769 15,817 15,403 16,567 16,228 16,825

Enigma 16,721 17,296 16,576 16,754 16,025 15,098

Sky City 16,421 16,383 16,048 17,172 16,048 16,548

Project Completion (%)

Oberoi Esquire 71.4 63.8 57.3 52.86 43.3 39.5

Oberoi Exquisite 100 100 100 100 100 100.0

Three Sixty West * * * * * *

Priviera 100 100 100 100 100 100.0

Prisma 58.1 55.8 53.9 50.48 44.4 42.3

Eternia * * * * * *

Enigma * * * * * *

Sky City * * * * * *

Inventory as on Date (sq ft)

Oberoi Exquisite 185865 192755 194575 211495 229715 244,145

Three Sixty West 1442777 1488204 1516890 1585178 1640498 1,640,498

Priviera ** 2350 2350 2350 2350 2350 4,700

Prisma 89248 101612 104214 115609 135797 141,001

Eternia# 311880 325020 331260 346640 351650 358,330

Enigma# 455434 465541 468611 479331 492808 201,625

Sky City# 880021 906383 942163 970677 1030295 947037


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,

media reports indicate that 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 | 215.0 crore in

FY19E vs. | 150.0 crore in FY16 driven by 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

0.30.50.5 0.5 0.5 0.5

0.50.5

0.5

0.50.8 0.8 0.9 0.90.9

1.01.2

1.3

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 43 43

456778 79 87

94 94

100103

104122 126

135147 150

173

192

215

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 FY16, it

reported a revenue and EBITDA of | 127.9 crore and | 31.9 crore,

respectively. In Q4FY17, it reported revenue of | 33.9 crore and EBITDA

margin of 38.9% with occupancy rate of 85.7%. Going ahead, we expect

it to post a topline & bottomline of | 146.2 crore and | 43.8 crore,

respectively, in FY19E.

Exhibit 8: Hotel revenue trend

112.7

122.8128.0 126.6

136.0

146.2

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

40.8

43.8

26.9

30.3

34.5

30.0

32.5

30.0

0.0

10.0

20.0

30.0

40.0

50.0

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 Q4FY17 Q3FY17 Q2FY17 Q1FY17 Q4FY16

Oberoi Mall (Retail Property)

Operating Revenue (| crore) 25.7 25.3 24.7 24.4 22.8

EBITDA margin (%) 93.3 93.9 93.6 92.6 94.1

Occupancy (%) 99.7 99.9 90.9 90.8 99.5

Realisation (|/sqft/month) 155 152 164 162 138

Commerz I (Commercial Space)


EBITDA margin(%) 99.5 98.8 100.3 99.2 99.0

Occupancy (%) 88.5 88.5 88.5 88.5 88.5


Commerz II Phase I (Commercial Space)


EBITDA margin(%) 80.4 68.4 49.6 41.6 -16.3

Occupancy (%) 29.9 29.9 27.1 13.0 13.0


The Westin Mumbai Garden City

(Hospitality)


EBITDA margin(%) 38.9 39.4 28.8 29.2 34.1

Average Room Rate (|) 8532 8889 8226 8166 9041

Occupancy (%) 85.7 81.5 75.0 77.3 77.5

RevPAR (|) 7312 7255 6173 6310 7026



Recognised revenues to grow at 59.6% CAGR over FY17-19E…

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

any new project hitting revenue recognition threshold and slow sales

momentum. Going forward, we expect revenues to grow robustly at

59.6% CAGR in FY17-19E to | 2836.6 crore with Mulund projects

expected to hit revenue recognition threshold by FY18E end and more

revenues expected to get recognised from completed projects such as

Oberoi Exquisite.

Exhibit 11: Revenues to grow at 59.6% CAGR over FY17-19E…

922.7

1,408.1

1,113.7

2,836.6

2,584.4

500

1000

1500

2000

2500

3000

3500

FY15 FY16 FY17 FY18E FY19E

(|

crore)

CAGR - 59.6%


EBITDA margin to rise marginally…

ORL’s EBITDA margin has dropped significantly in FY16 to 47.7% from

~56.5% in FY15. Going ahead, we expect margins to be in the range of

48-51% given the larger share of residential revenues recognition, which

is typically of lower margins than hospitality and leasing.

Exhibit 12: EBITDA margin trend

55.8

47.4

51.248.9

48.9

35

40

45

50

55

60


(%

)


ORL’s revenues are expected to grow at a CAGR of 59.6%

CAGR during FY17-19E


Net profit to grow at 54.2% CAGR during FY17-19E…

Overall, we expect ORL’s bottomline will grow at a CAGR of 54.2% during

FY17-19E to | 900.8 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 54.2% CAGR during FY17-19E

317.8 425.9 378.7 900.8851.5

0

100

200

300

400

500

600

700

800

900

1000


(|

crore)

CAGR - 54.2%


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 19.3% RoCE and 14.7% RoE in FY19E.

Exhibit 14: Return ratio to bounce back

8.8

6.9

11.0

8.3

18.8 19.3

8.0

6.3

13.714.7

0

4

8

12

16

20

24

FY15 FY16 FY17E FY18E FY19E

(%

)

RoCE RoNW


We expect ORL’s bottomline to grow at a CAGR of 54.2%

during FY17-19E to | 900.8 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 & management bandwidth to execute large projects. Though sales

volumes look strong sequentially, we await a strong pick-up in the sales

volumes, going forward. Further, the recent rally in the stock (up ~21% in

past three months) leaves no room for upside. Hence, we continue to

maintain our HOLD rating on the stock with a revised TP of | 385.

Exhibit 15: Valuation

Location Type Status

Saleable Area ( in mn

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

Goregaon 10.1 5,992.2 5,527.8 163.0

Oberoi Mall Retail Completed 0.6 1,123.5 1.0 1,123.5 33.1

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 1.5 755.8 1.0 755.8 22.3

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 0.8 970.1 28.6

Oberoi International school Social Infrastructure Ongoing 0.3

Education complex Planned 0.9

Hospital Planned 0.4

Andheri/Khar/Borivali 3.1 3,469.2 3,441.5 101.5

Oberoi Maxima Commercial Ongoing 0.3 209.6 0.9 188.7 5.6

Oberoi Prisma Residential Ongoing 0.7 104.1 1.0 104.1 3.1

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 3,072.8 1.0 3,072.8 90.6

Worli 3.4 2,012.2 1,716.8 50.6

Oasis Residential Residential Ongoing 2.3 535.2 1.0 535.2 15.8

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 1,513.9 1,513.9 44.6

Eternia Residential Ongoing 1.6 724.6 1.0 724.6 21.4

Enigma Residential Ongoing 1.6 789.4 1.0 789.4 23.3

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) 697.4 1.0 697.4 20.6

Total 21.2 13,762.5 0.9 12,968.3 383

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 30.7 19.9 8.0 11.0

FY17E 1107.6 -20.9 11.5 -11.1 34.5 22.8 6.7 8.6

FY18E 2577.6 132.7 25.9 124.9 15.3 9.7 12.7 17.2

FY19E 2829.2 9.8 27.4 5.8 14.5 8.8 12.7 17.4



Recommendation History vs. Consensus

125

250

375

500

May-17Feb-17Dec-16Sep-16Jul-16May-16Feb-16Dec-15Sep-15Jul-15Apr-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-Sep-16 62.7% 212.9 0.0

2 R S Estate Developers Pvt. Ltd. 30-Sep-16 9.8% 33.3 0.0

3 Aranda Investments (Mauritius) Pte. Ltd. 30-Sep-16 3.7% 12.4 0.0

4 Franklin Advisers, Inc. 28-Feb-17 2.2% 7.4 0.4

5 APG Asset Management 30-Sep-16 1.6% 5.5 0.1

6 OppenheimerFunds, Inc. 30-Sep-16 1.4% 4.8 0.0

7 BlackRock Asset Management North Asia Limited 30-Sep-16 1.3% 4.4 0.5

8 FIL Investment Management (Singapore) Ltd. 31-Jan-17 1.2% 4.1 0.0

9 SSIII Indian Investments Two, Ltd. 30-Sep-16 0.9% 3.0 -6.8

10 The Vanguard Group, Inc. 28-Feb-17 0.7% 2.5 0.0

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

Promoter 72.54 72.54 72.53 72.5

FII 22.07 24.23 25.35 25.35

DII 0.68 0.51 0.31 0.57

Others 4.71 2.72 1.81 1.57

Source: Reuters, ICICIdirect.com Research

Recent Activity

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

TT International 3.9 0.7 J.P. Morgan Asset Management (Hong Kong) Ltd. -3.3 -0.7

Franklin Advisers, Inc. 2.0 0.4 Alpine Woods Capital Investors, LLC -0.6 -0.1

Templeton Investment Counsel, L.L.C. 0.5 0.1 Stewart Investors -0.6 -0.1

Amundi Asset Management 0.4 0.1 Skagen AS -0.5 -0.1

BlackRock Investment Management, LLC 0.3 0.1 UTI International (Singapore) Pvt. Ltd. -0.3 -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 2,577.6 2,829.2

Other Operating Income 8.4 6.2 6.8 7.5

Total Operating Income 1,408.1 1,113.7 2,584.4 2,836.6

Growth (%) 52.6 -20.9 132.0 9.8

Operating Costs 629.7 437.1 1,201.3 1,323.8

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 1,313.1 1,441.2

EBITDA 659.1 564.0 1,264.5 1,388.0

Growth (%) 28.1 -15.5 121.8 9.8

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 1,201.7 1,344.4

Prior Period Adjustments 0.0 0.0 0.0 0.0

Total Tax 228.6 186.9 396.6 443.7

PAT before profit from associates 425.9 375.6 805.1 900.8

Minoriy Interest 0.0 0.0 0.0 0.0

Profit from associates 0.0 3.1 46.4 76.1

PAT 425.9 378.7 851.5 900.8

EPS (|) 13.0 11.5 25.9 27.4


Cash flow statement (| Crore)

(Year-end March) FY16 FY17E FY18E FY19E

Profit after Tax 425.9 378.7 851.5 900.8

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 -583.5 -660.5

Net Increase in Current Liabilities 329.1 -49.7 548.8 -94.3

Net cf from operating activities 426.7 390.6 879.6 189.5

(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 -127.7 -135.1

Interest paid -86.2 -5.6 -62.9 -62.9

Net cf from Financing Activities -181.2 257.3 -190.7 -198.1

Net Cash flow 2.1 520.3 716.0 23.7

Opening Cash/Cash Equivalent 293.7 320.9 841.1 1,557.1

Closing Cash/ Cash Equivalent 320.9 841.1 1,557.1 1,580.8


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 5,980.4 6,746.0

Total Shareholders funds 5,304.3 5,595.9 6,319.7 7,085.4

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 7,334.1 8,099.7

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 4,494.6 4,937.9

Debtors 117.0 119.3 143.1 171.7

Loans and Advances 1,993.7 1,661.4 1,933.2 2,121.9

Cash 320.9 841.1 1,557.1 1,580.8

Other Current Assets 26.7 26.7 26.7 26.7

Total Current Assets 6,388.9 6,855.3 8,154.8 8,839.0

Creditors 1,786.7 1,737.0 2,285.8 2,191.5

Provisions 4.4 4.4 4.4 4.4

Net Current Assets 4,597.8 5,113.9 5,864.6 6,643.1

Deferred Tax Assets 0.0 0.0 0.0 0.0

Total Assets 5,968.7 6,610.3 7,334.1 8,099.7


Key ratios


Per share data (|)

EPS 13.0 11.5 25.9 27.4

Cash EPS 14.5 13.0 27.5 28.6

BV 161.6 170.5 192.5 215.9

Operating profit per share 20.3 17.4 38.5 42.3

Cash Per Share 9.8 25.6 47.4 48.2

Operating Ratios (%)

EBITDA Margin 47.7 51.5 49.1 49.1

PBT / Net Sales 46.8 50.8 46.6 47.5

PAT Margin 30.4 33.9 31.2 31.8

Inventory days 1,025 1,386 636 637

Debtor days 31 39 20 22

Creditor days 467 574 324 283

Return Ratios (%)

RoE 8.0 6.7 12.7 12.7

RoCE 11.0 8.6 17.2 17.4

RoIC 11.2 9.5 22.1 21.6

Valuation Ratios (x)

P/E 30.7 34.5 15.3 14.5

EV / EBITDA 19.9 22.8 9.7 8.8

EV / Net Sales 9.5 11.7 4.8 4.3

Market Cap / Sales 9.3 11.8 5.1 4.6

Price to Book Value 2.5 2.3 2.1 1.8

Solvency Ratios (x)

Debt / EBITDA 1.0 1.7 0.8 0.7

Debt / Equity 0.1 0.2 0.2 0.1

Current Ratio 3.4 3.5 2.9 3.3

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) 398 385 Hold 13,062 13.0 11.5 25.9 30.7 34.5 15.3 19.9 22.8 9.7 2.5 2.3 2.1 8.0 6.7 12.7

Sobha (SOBDEV) 412 415 Hold 4,040 15.6 16.4 20.7 25.5 24.3 19.3 12.0 14.5 11.4 1.5 1.5 1.4 6.0 6.1 7.3

P/B (x) RoE (%)

Sector / Company

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



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