Oberoi Realty retains good quarter, strong launch momentum

Recent launches, coming projects should improve cash flows

The scrip of Mumbai-based Oberoi Realty rose three per cent on Monday, on better-than-expected December quarter results and a strong launch pipeline. Its revenue increased to Rs 217 crore, up 27 per cent over the same period a year ago, against estimated growth of 12-17 per cent.

Higher bookings in its Goregaon project, Exquisite, and a low base helped boost the top line. Coupled with a better show in its hospitality unit, Hotel Westin, profit after tax was higher at Rs 79 crore, against analysts' estimate of Rs 65-75 crore.

Salesspurted 41 per cent to Rs 126 crore reflected in operating profit. Contribution from the high margin Esquire project helped enhance profit margins by 565 basis points to 58.3 per cent.

Sales are expected to pick up, given the recent launches and the pipeline in the calendar year 2015. The company this month launched its Exotica project in Mulund, Mumbai, with a total saleable area of 3.3 million sq ft. The project comprises two developments, Eternia and Enigma. It is expected to get good response, given the pricing discount in Eternia compared with projects in the area. Analysts peg the total sales value of the project Rs 4,400-5,000 crore and add about Rs 34 to the net asset value per share.

The company had pre-launched the Prisma project in December last year and has lined up the Oasis residential project, Worli, and the Borivali project (Tata Steel land) for this calendar year. Fresh leasing of the first phase of Commerz II should also improve revenue. The launch of a large scale project (Prisma) comes after about three years and offers much-awaited revival in the monetisation cycle, according to analysts at Motilal Oswal Securities. While the economic sentiment is turning positive, how the company prices the assets in the launch pipeline would be crucial for higher volumes.

At the current price, the stock is trading at 11.5 times its FY16 estimates. Most analysts peg the target price at Rs 310-328, translating to an upside of 12-18 per cent from these levels.