Weaker than expected bookings in Q3, valuations to weigh on Oberoi Realty

The stock of realty major Oberoi Realty is down 18 per cent.
 

A weaker-than-expected operational performance in the December quarter of 2023-24 has resulted in the downward revision of booking estimates for FY24-FY25.

The stock lacks near-term triggers with upsides from new launches already factored in.

Despite the sharp fall this week, the stock of the Mumbai-based company is still up 19 per cent over the last three months.

The near-term trigger for the negative sentiment of the stock is the sub-par bookings in the quarter. 

The company reported Rs 787 crore of bookings in Q3.

While this was up 25 per cent as compared to the year-ago quarter, it was down 18 per cent on a sequential basis despite a new launch.

The new project at Thane saw moderate bookings of 116 units with a value of Rs 209 crore, while Sky City (Borivali) saw sales of 40 units at Rs 147 crore.

The other major contributors were Enigma (Mulund) with sales of 23 units at Rs 143 crore and Elysian (Goregaon) which reported sales of 16 units at Rs 123 crore.

The company sold one unit at its luxury project 360 West. 

 

Say Pritesh Seth and Sourabh Gilda of Motilal Oswal Research: “The decline in sales at Sky City (Borivali) and 360 West (Worli) impacted the company’s overall performance as the company failed to sustain its usual quarterly run-rate of Rs 900 crore to Rs 1,000 crore despite the new launch at Thane.”

A positive development for the company has been inventory sales at the newly launched tower at Elysian.

The company has sold inventories worth Rs 880 crore at this tower.

Murtuza Arsiwalla and Abhishek Khanna of Kotak Research say that this is an encouraging development in an otherwise dull year-to-date for Oberoi.

It takes the year-to-date sales to Rs 3,100 crore (Rs 2,200 crore for 9MFY24, -12 per cent year-on-year (Y-o-Y), lending support to the full year pre-sales estimate of Rs 4,400 crore, says the brokerage. 

The lack of traction in bookings in the December quarter led to cuts in estimates. 

Given the weak operational performance in 3Q, Motilal Oswal Research has reduced its pre-sales estimate for FY24-FY25 by 21 per cent and 12 per cent respectively.

There are no near-term positive triggers for the stock and given that it is trading at 50 per cent above its residential net asset value, a large part of the growth potential from the launch of Thane and Gurugram is already priced in

While Motilal Oswal Research reiterated a neutral rating, Kotak Research has a reduced rating on the stock.

Oberoi Realty has a large inventory of completed/near-completed assets at Three Sixty West (Worli), Eternia, and Enigma (Mulund) as well as Sky City (Borivali), which will likely yield very healthy cash generation, say Arsiwalla and Khanna of the brokerage.

"With the Pokhran Road launch being pushed to September 2024, we believe the current market price adequately reflects the positives," they add.