Oberoi Realty flying high on new launches; brokerage bullish on the stock

The Mumbai-based real estate developer Oberoi Realty has been one of the top-performing companies in its segment and most brokerage remains bullish on the stock.

The company’s stock price is 52 per cent in the last 12 months beating the broader market by a huge margin.

The benchmark BSE Sensex is up just 6.5 per cent during the period. The stock, however, largely underperformed at the BSE Realty Index and is up 57 per cent in the last 12 months.

Oberoi Realty closed at Rs 1349.8 per share on Monday up from Rs 888.7 a year ago on November 22, 2022.

The rally in the company’s stock price came after it reported better-than-expected results in Q2FY24.

The company's consolidated net sales were up 76.8 per cent year-on-year (Y-o-Y) to Rs 1217.4 crores while net profits were up 43.4 per cent Y-o-Y to Rs 456.8 crore in Q2FY24. As a result, its stock price is up 23 per cent since its Q2FY24 results better than the BSE Realty Index which is up 18.4 per cent during the period.

The company declared its Q2FY24 results on October 27.

Analysts expect the company to maintain its growth momentum and continue to deliver strong earnings growth with new project launches.

"Given the expected robust cash flows from ready-to-move-in inventory in the 360W and Mulund projects along with new business development outside the Mumbai Metropolitan Region (MMR), we remain constructive on Oberoi Realty," says Parikshit D Kandpal and Manoj Rawat of HDFC Securities in the company's Q2FY24 result review.

"Oberoi Realty reported a healthy operational and profit and loss performance in Q2FY24, which was above our estimates. While the launch pipeline remains strong, we cut our pre-sales for FY24 by 13 per cent on account of the pushout of the Pokhran road project launch to 4QFY24. With the stock trading at 50 per cent above its residential net asset value (NAV), a large part of this growth is already priced in. Thus, investments in new land could be the only positive trigger for the stock," says Pritesh Sheth and Sourabh Gilda of Motilal Oswal Financial Services.

According to Motilal Oswal, Oberoi Realty has enough land banks, which can enable it to strive through multiple cycles and hence, it does not want to be aggressive in adding new projects.

The company recently forayed into the National Capital Region (NCR) and bought 15 acres in Gurgaon for a luxury residential development.

According to an analyst at Motilal Oswal, the Gurgaon project has the potential to generate revenues worth Rs 9,000-10,000 crore with a gross cash surplus of around Rs 5,000 crore before overheads and taxes.

The company plans to launch this project in the next 12 months, and the size of the launch will depend on the demand scenario.

Analysts at Yes Securities have rerated the stock on the back of strong cash flows from new projects and its strong delivery record.

“We increased premium to 25 per cent from 20 per cent on the current portfolio and arrived at a sum of the parts (SoTP) based 1-year forward NAV of Rs 1422/share,” says Abhishek Lodhiya and Sonu Upadhay of Yes Securities.