Robust launches to sustain growth momentum for Oberoi Realty in near term

The company registered record Q3 sales bookings

Strong residential growth on the back of lower interest rates, measures by the state government, and improving demand have helped Oberoi Realty post strong volumes and sales in the October-December quarter.
 
Sales bookings in first nine months of the financial year exceeded 2019-20 booking values, revealed the real estate development company based out of Mumbai.
 
Even though the results were strong, notwithstanding the weakness in the overall market, the Oberoi Realty stock was down 3 per cent in intra-day trade on Monday. Bookings for the quarter were up 229 per cent in volume terms and 220 per cent higher in value, compared to the year-ago period, reaching nearly Rs 1,000 crore. A favourable product mix skewed towards projects nearing completion and strong demand ensured record sales.
 
Barring sales in Three Sixty West, projects across the Mumbai region — be it Esquire (Goregaon), Enigma and Eternia (Mulund) or Sky City (Borivali) — saw healthy traction. Analysts expect the demand momentum to continue in the coming quarters.
 
“Strong demand dynamics, coupled with a robust launch pipeline, are likely to keep the momentum going for the residential segment,” said Alpesh Thacker, equity research analyst, Motilal Oswal Financial Services. The pipeline includes 5 million square feet of launches in the current quarter across all projects.

 
The management in a post-results conference call indicated that established players were gaining market share and the supply was not enough to meet rising demand.
 
However, the Street will keep a watch on how demand shapes up in April, as stamp duty concessions expire at the end of 2020-21. In addition to stamp duty cuts, Maharashtra has also offered 50 per cent reduction in construction-related premiums.
 
Though the residential space remains strong and trends in the office category are stable, the hospitality segment has been hit hard. Revenue in the segment declined 71 per cent year-on-year, with the firm reporting a loss at the operating level. The key monitorables, according to JM Financial,  are the launch of a Thane project and monetisation of the commercial portfolio. Even though the stock is flat, compared to the year-ago levels, it has gained 25 per cent in the past three months. Given the price target, there is 17 per cent upside from the current levels.
 
Commenting on Q3FY21 results, Vikas Oberoi (pictured), chairman and managing director, Oberoi Realty, had said: “Q3 saw a convergence of multiple positive factors for resulting in our nine-month FY21 booking values surpassing the entire FY20 numbers. This assumes special significance considering that the beginning of FY21 has been severely impacted by the pandemic.”