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UBS Investment Research
Oberoi Realty
2 QFY12: Operationally steady
Event: 2Q12 Earnings ahead of UBSe
Q2 Revenues grew 31% YoY to Rs 2.2bn (ahead of UBSe of Rs 1.6bn). EBITDA
margins declined to 52% (vs. 56% in Q1) driven by cost revision on projects,
however, EBITDA grew 15% YoY to Rs 1.15bn. Net Income grew 17% YoY to
Rs 1.11bn on higher interest income. Pre-sales lower at 0.18msf (vs. 0.21msf Q1),
however we believe this is positive relative to Mumbai absorption (down 30-40%).
Impact: Maintain 24% earnings CAGR through FY14E
With 1) pre-sales momentum on Goregaon projects picking up during the festive
season in Q3, plans to raise prices in 3QFY12 for few of its ongoing projects; 2)
Rentals and hotel revenues expected to grow; and 3) New launches of Worli-Oasis
(by 4QFY12) and Mulund (1QFY13) - we forecast earnings to grow 24% through
FY14E.
Action: Re-iterate Buy; Cash utilization, Pre-sales pickup key catalysts
We see key catalysts of 1) Efficient cash utilization (Rs ~12bn) on distressed
opportunities amid deteriorating market conditions 2) Pre-sales better than Mumbai
market given regulatory uncertainties 3) Growing rental annuity stream. Further,
we see Oberoi leveraging its cash reserves – recent acquisition of ICICI Ventures’
50% stake in prime land at Worli, Mumbai (approx Rs 2.8bn) at lower than market
prices, makes it value-accretive; expect more such acquisition-led growth ahead.
Valuation: Attractive at 41% disc to NAV
With stock trading at 41% disc to NAV Rs 400, we find valuations attractive. We
view Oberoi as a relatively defensive play in the current risk-averse environment.
We base our price target on a 25% discount to our NAV estimate.
Oberoi Realty
Oberoi Realty is a premium Indian developer involved in residential and
commercial developments, and has built 34 projects for an aggregate 5msf over
the past 30 years. The company is involved in the residential, office, retail,
hospitality and social infrastructure segments in Mumbai.
Statement of Risk
Key risks to Oberoi include exposure to Mumbai market, slowdown in economic
growth, rising rates and regulatory risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Oberoi Realty
2 QFY12: Operationally steady
Event: 2Q12 Earnings ahead of UBSe
Q2 Revenues grew 31% YoY to Rs 2.2bn (ahead of UBSe of Rs 1.6bn). EBITDA
margins declined to 52% (vs. 56% in Q1) driven by cost revision on projects,
however, EBITDA grew 15% YoY to Rs 1.15bn. Net Income grew 17% YoY to
Rs 1.11bn on higher interest income. Pre-sales lower at 0.18msf (vs. 0.21msf Q1),
however we believe this is positive relative to Mumbai absorption (down 30-40%).
Impact: Maintain 24% earnings CAGR through FY14E
With 1) pre-sales momentum on Goregaon projects picking up during the festive
season in Q3, plans to raise prices in 3QFY12 for few of its ongoing projects; 2)
Rentals and hotel revenues expected to grow; and 3) New launches of Worli-Oasis
(by 4QFY12) and Mulund (1QFY13) - we forecast earnings to grow 24% through
FY14E.
Action: Re-iterate Buy; Cash utilization, Pre-sales pickup key catalysts
We see key catalysts of 1) Efficient cash utilization (Rs ~12bn) on distressed
opportunities amid deteriorating market conditions 2) Pre-sales better than Mumbai
market given regulatory uncertainties 3) Growing rental annuity stream. Further,
we see Oberoi leveraging its cash reserves – recent acquisition of ICICI Ventures’
50% stake in prime land at Worli, Mumbai (approx Rs 2.8bn) at lower than market
prices, makes it value-accretive; expect more such acquisition-led growth ahead.
Valuation: Attractive at 41% disc to NAV
With stock trading at 41% disc to NAV Rs 400, we find valuations attractive. We
view Oberoi as a relatively defensive play in the current risk-averse environment.
We base our price target on a 25% discount to our NAV estimate.
Oberoi Realty
Oberoi Realty is a premium Indian developer involved in residential and
commercial developments, and has built 34 projects for an aggregate 5msf over
the past 30 years. The company is involved in the residential, office, retail,
hospitality and social infrastructure segments in Mumbai.
Statement of Risk
Key risks to Oberoi include exposure to Mumbai market, slowdown in economic
growth, rising rates and regulatory risks.
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