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Oberoi Realty Ltd
Preferred India Property Play
OBER remains our preferred play on the Indian
Property market given its strong balance sheet
(Rs13bn net cash), preparedness to monetize its land
bank and strong brand name. Stock weakness due to
ongoing slowdown in Mumbai market is an
opportunity to buy, we believe. We are OW with a PT
of Rs345 and a potential upside of another 47%
Key Catalysts: Healthy Mumbai market with steady growth in
volume demand and pricing; Land bank accretion using
surplus cash and/or through JDA; Construction progress in
investment assets (Commerz II) and pre-leasing trends in
Commerz II – Phase 1; Unlocking value in pipeline projects –
Exotica, Oasis and Glaxo Land (Worli).
Key Investor Debate: The market expects OBER to be hurt
by the ongoing slowdown in Mumbai property market. We
think the slowdown will be short term as the mid-to-long term
demand drivers (GDP growth, employment creation) are
intact. It has maintained a quarterly sale rate of 85-95 units
cumulatively across its ongoing projects (Exquisite, Esquire,
Splendor and Splendor Grande)
Land bank augmentation is a challenge for OBER, especially
in the lucrative but land-scarce Mumbai market. However its
cash-rich balance sheet (Rs13bn net cash) provides it the
means to bid for lucrative land purchase deals unlike its peers
who have b/s limitations.
Risks to our Call: 1. Sharp/prolonged slowdown in the
Mumbai property market; 2. unable to find value enhancing
land bank in Mumbai; 3. Sangamwadi (Pune) project -
currently facing hurdles - does not materialize; 4. Exotica
(Mulund) project launch gets delayed beyond F13 on account
of regulatory issues; 5. Inability to maintain premium pricing
over peers.
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