February 2, 2018
ICICI Securities Ltd | Retail Equity Research
Result Update
Strong financial performance…
Oberoi Realty's Q2FY18 sales performance was below our
expectations mainly on account of subdued sales in the Eternia and
Enigma projects. On the financial front, the results were above our
estimates on all parameters
Sales volumes declined 12.5% sequentially to 1.51 lakh sq ft with
sales value of | 406.3 crore. Sales volume was below our estimates
of 1.8 lakh sq ft mainly on account of lower-than-expected sales
volume of 6680 sq ft in ‘Eternia project’ (our expectation: 20000 sq ft)
and no sales in Enigma project (our estimate: 20000 sq ft)
Revenues grew robustly by 41.2% YoY to | 356.2 crore (our
estimate: | 326.0 crore)
EBITDA margin expanded 400 bps YoY to 54.1% mainly on account
of a change in the project mix. It was above our expectation of 53.1%
PAT grew 42.6% YoY to | 120.2 crore (our estimate: | 110.7 crore)
led by topline growth and strong EBITDA margin expansion
Sales volumes decline 12.5% QoQ to 1.51 lakh sq ft…
Oberoi’s sales volumes de-grew 12.5% QoQ to 1.51 lakh sq ft in Q3FY18
due to poor performance in Mulund projects with sales volumes of 6680
sq ft (our expectation: 40000 sq ft). Going forward, ORL would look to
launch a project in Thane and subsequent phases of Borivali and Mulund
projects. Consequently, we expect sales volumes to grow from 0.6 msf in
FY17 to 1.5 msf in FY20E.
Mumbai market could face supply side crunch in future…
The management is of the view that there could be a supply-side
constraint in the Mumbai market over the next two years given the
dumping ground issue which has not been sorted out. However, on a
positive note, the company has all approvals in place for all its projects.
Over the past two years, no new approvals have been issued to
developers. Furthermore, the management has mentioned that there has
already been over-supply in the Mulund market. While, in Worli market,
there is supply but the company has a differentiated product in place so it
wont be much impacted.
Revenue recognition timelines delayed…
The management has given its revenue recognition threshold timelines. It
expects SkyCity to reach threshold in Q1FY19, Eternia in Q2FY19E,
Enigma in Q3FY19E and Worli in H1FY19. However, we still expect the
company to maintain healthy topline, PAT growth of 50.1%, 38.0% CAGR
to | 2835.7 crore, | 814.0 crore, respectively, over FY18-20E.
Looks to commence operations at new mall by 2020…
For Worli mall (on Glaxo land), the work has started. It plans to complete
it by 2020. While for the Borivali mall is at the design stage and some
excavation work has started. Furthermore, for Commerz II, the company
expects to sign one new client in Q4FY18 and close the year with
occupancy close to 65-70% (44.7% in Q3FY18)
Await better entry point; maintain HOLD…
We like the company given the quality of land bank, its healthy balance
sheet and management bandwidth to execute large projects. Even, the
sales performance has shown signs of improvement. We roll over our
valuations to FY20E. However, the stock has run up ~35% in the last six
months. However, we await a better entry point. Hence, we continue to
maintain our HOLD rating on the stock with a revised target price of | 490.
Rating matrix
Rating : Hold
Target : | 490
Target Period : 12 months
Potential Upside : 0%
What’s Changed?
Target Changed from | 450 to | 490
EPS FY18E Changed from | 20.6 to | 12.6
EPS FY19E Changed from | 25.7 to | 27.7
EPS FY20E Introduced at | 24.0
Rating Unchanged
Quarterly Performance
| crore Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)
Revenue 356.2 252.2 41.2 303.5 17.4
EBITDA 192.6 126.3 52.5 163.8 17.6
EBITDA (%) 54.1 50.1 400 bps 54.0 12 bps
PAT 120.2 84.3 42.6 104.3 15.2
Key Financials
| Crore FY17 FY18E FY19E FY20E
Net Sales 1,113.7 1,258.7 2,983.9 2,835.7
EBITDA 570.2 666.1 1,491.2 1,331.0
Net Profit 378.7 427.2 940.7 814.0
EPS (|) 11.2 12.6 27.7 24.0
Valuation summary
(x) FY17 FY18E FY19E FY20E
P/E 43.9 39.0 17.7 20.4
Target P/E 43.9 38.9 17.7 20.4
EV / EBITDA 26.9 23.5 10.4 11.4
P/BV 2.9 2.7 2.4 2.2
RoNW (%) 6.6 7.0 13.7 10.7
RoCE (%) 8.6 8.4 17.4 14.4
Stock data
Particular Amount (| crore)
Market Capitalization 16,644.0
Total Debt 901.6
Cash 1,763.0
EV 15,782.6
52 week H/L (|) 562 / 319
Equity capital 328.2
Face value (|) 10.0
Price performance (%)
Return % 1M 3M 6M 12M
Sobha (9.1) 8.3 41.9 119.1
Sunteck Realty (2.7) 14.1 77.4 236.4
Mahindra Lifespace 6.9 9.5 16.0 49.9
Oberoi Realty 9.3 14.8 35.0 71.8
BSE Realty 0.1 16.9 20.8 90.1
Research Analyst
Deepak Purswani, CFA
Vaibhav Shah
Oberoi Realty (OBEREA) | 490
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
[
Q3FY18 Q3FY18E Q3FY17 YoY (Chg %) Q2FY18 QoQ (Chg %) Comments
Income from Operation 356.2 326.0 252.2 41.2 303.5 17.4 Revenues grew robustly on acount of strong execution
Other Income 4.2 5.0 12.7 -67.2 5.0 -16.3
Operating Cost 137.1 118.9 99.7 37.5 110.7 23.9
Employee cost 15.0 22.5 17.3 -13.4 18.5 -19.2
Other expenditure 11.5 11.3 9.0 28.3 10.6 9.1
EBITDA 192.6 173.2 126.3 52.5 163.8 17.6
EBITDA Margin (%) 54.1 53.1 50.1 400 bps 54.0 12 bps The EBITDA margin expansion was led by change in the project mix
Depreciation 12.2 12.8 12.5 -2.2 12.8 -4.3
Interest 1.8 1.6 1.5 20.8 1.6 11.1
PBT 182.8 163.8 125.0 46.2 154.4 18.4
Taxes 63.5 54.0 40.7 56.1 50.9 24.8
PAT 120.2 110.7 84.3 42.6 104.3 15.2 Robust PAT growth was led by strong topline growth and EBITDA margin
expansion
Key Metrics
Sales Volume (in sq ft) 151,763 180,000 106,214 42.9 173,403 -12.5 Sales volumes degrowth was on account of poor sales performance at Mulund
projects
Source: Company, ICICIdirect.com Research
Change in estimates
FY20E
(| Crore) Old New % Change Old New % Change Introduced Comments
Revenue 2,224.5 1258.7 -43.4 2703.4 2983.9 10.4 2835.7 We have revised our estimates downwards for FY18 as we have
delayed revenue recognition of Mulund, Borivali and Worli projects
in-line with management commentary
EBITDA 1,085.2 666.1 -38.6 1315.3 1491.2 13.4 1331.0
EBITDA Margin (%) 48.8 52.9 411 bps 48.7 50.0 128 bps 46.9
PAT 685.0 427.2 -37.6 852.1 940.7 10.4 814.0
EPS (|) 20.9 12.6 -37.6 26.0 27.7 10.4 24.0
FY18E FY19E
Source: Company, ICICIdirect.com Research
Assumptions
FY16 FY17 FY18E FY18E FY19E FY19E FY20E Comments
Volume sold in msf New Earlier New Earlier Introduced
Goregaon 0.2 0.1 0.2 0.2 0.3 0.5 0.2
Andheri/Borivali 1.1 0.2 0.2 0.2 0.5 0.5 0.6
Worli 0.0 0.2 0.1 0.2 0.1 0.2 0.2
Mulund 0.0 0.1 0.1 0.1 0.3 0.3 0.4
Pune 0.0 0.0 0.0 0.0 0.2 0.2 0.2
Total 1.3 0.6 0.6 0.7 1.5 1.6 1.5 We have tweaked our estimates
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Conference call highlights:
Revenue recognition: The management has delayed their revenue
recognition threshold timelines. The company expects SkyCity to
reach threshold in Q1FY19, Eternia in Q2FY19E, Enigma in
Q3FY19E and Worli in H1FY19
Commerz II update: The company expects to sign new client in
Q4FY18 and close the year with occupancy close to 65-70%
(44.7% in Q3FY18)
New launches: The company is looking to launch Exquisite Phase
III in Q1FY19E
Mall update: The Borivali mall is at the design stage and some
excavation work has started. While for Worli mall also (on Glaxo
land), the work has started and the company plans to complete it
by 2020
Mulund project sales momentum: The sales momentum at
Mulund projects has been impacted as the company is unable to
come to terms with Mulund being a cash market, where 90% of
the developers are selling in cash
Esquire project: The company has applied for occupational
certificate for Esquire project on January 29, 2018
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Sales volumes grow robustly…
Oberoi reported a subdued sales performance with sales volumes de-
growing 12.5% QoQ to 1.51 lakh sq ft in Q3FY18 with sales value of
| 406.3 crore. The weak sales performance was mainly on account of
poor sales at Eternia & Enigma projects which reported sales volumes of
6680 sq ft and nil, respectively. However, on a positive note, the company
reported strong sales performance at its Worli and Borivali projects which
recorded sales volumes of 47479 sq ft and 47027 sq ft in Q3FY18,
respectively. Going forward, ORL would look to launch a project in Thane
and subsequent phases of Borivali and Mulund projects. Also, in early
FY19E, it is planning to launch third phase of Goregaon project
Consequently, we expect the sales volumes to grow from 0.6 msf in FY17
to 1.5 msf in FY20E
Exhibit 1: Sales volume picking up
10.2
1.4
1.4
7
1.0
6
1.3
5
1.7
3
1.5
2
1.7
7
0.9
8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
(la
kh s
q f
t)
Source: Company, ICICIdirect.com, Research
Exhibit 2: Sales volumes to improve here on…
0.2 0.2 0.1 0.20.3 0.20.0
0.1
0.50.6
0.1
0.1 0.2
0.3 0.4
0.2 0.2
0.3
1.0
1.3
0.6 0.6
1.5 1.5
0.2
1.1
0.2
0.0
0.5
1.0
1.5
2.0
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(m
n s
q f
t)
Goregaon Andheri/Borivali Worli Mulund Pune
Source: Company, ICICIdirect.com, Research
Launches in Borivali, Mulund to adversely impact overall realisation…
ORL’s average realisation has been at a higher level mainly due to the
higher proportion of Oberoi Exquisite and Oberoi Esquire projects.
However, going ahead, with higher proportion of sales volume to be
derived from its Mulund and Borivali projects, we expect average
realisation to come down from current levels.
Exhibit 3: Quarterly average realisation trend
23,556
19,153
21,512
16,412
23,556
22,644
18,303
23,556
19,153
22,644
17,233
23,499
19,671
22,644
17,011
19,153
10,000
15,000
20,000
25,000
30,000
Goregaon
(Exquisite)
Goregaon
(Escquire)
Andheri Overall
(|
per sq ft)
Q4FY17 Q1FY18 Q2FY18 Q3FY18
Source: Company, ICICIdirect.com, Research
Exhibit 4: Annual realisation trend across projects
10,000
15,000
20,000
25,000
30,000
Goregaon
(Exquisite)
Goregaon
(Escquire)
Mulund Borivali Overall
(|
per sq ft)
FY16 FY17 FY18E FY19E FY20E
Source: Company, ICICIdirect.com, Research
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 5: Ongoing residential projects operational metrics
Particulars Q3FY18 Q2FY18 Q1FY18 Q4FY17 Q3FY17 Q2FY17
Area Booked (sq ft)
Oberoi Esquire 24432 50051 21106 21106 28016 16920
Oberoi Exquisite 17550 5330 6890 6890 1820 25102
Three Sixty West 47479 15020 45427 45427 28686 68288
Priviera - - - - - -
Prisma 8595 8958 12364 12364 2602 11395
Eternia 6680 21270 13140 13140 6240 15380
Enigma 0 16860 10107 10107 3070 10720
Sky City 47027 55914 26362 26362 35780 28514
Total 151,763 173,403 135,396 135,396 106,214 177,306
Sales Value (| crore)
Oberoi Esquire 48.1 103.0 38.2 38.2 53.7 53.5
Oberoi Exquisite 41.2 12.8 16.2 16.2 4.4 40.7
Three Sixty West 214.7 76.1 187.8 187.8 131.1 300.6
Priviera - - - - - -
Prisma 15.2 16.1 22.3 22.3 4.5 19.5
Eternia 10.3 32.1 20.7 20.7 9.9 23.7
Enigma - 25.3 16.9 16.9 5.3 17.8
Sky City 76.9 88.0 43.3 43.3 58.6 45.8
Average Realization for the quarter (|/sq ft)
Oberoi Esquire 19,671 20,583 18,113 18,113 19,153 31,608
Oberoi Exquisite 23,499 23,996 23,556 23,556 24,231 16,230
Three Sixty West 45,222 50,646 41,341 41,341 45,691 44,024
Priviera** - - - - - -
Prisma 17,708 17,962 18,012 18,012 17,333 17,139
Eternia 15,359 15,068 15,769 15,769 15,817 15,403
Enigma - 14,994 16,721 16,721 17,296 16,576
Sky City 16,342 15,740 16,421 16,421 16,383 16,048
Project Completion (%)
Oberoi Esquire 88.3 82.2 71.4 71.4 63.8 57.3
Oberoi Exquisite 100 100 100 100 100 100
Three Sixty West * * * * * *
Priviera 100 100 100 100 100 100
Prisma 74.0 62.0 58.1 58.1 55.8 53.9
Eternia * * * * * *
Enigma * * * * * *
Sky City * * * * * *
Inventory as on Date (sq ft)
Oberoi Exquisite 149075 166625 185865 187685 192755 194575
Three Sixty West 1938571 1986050 1442777 1471463 1488204 1516890
Priviera ** 0 0 0 2350 2350 2350
Prisma 68517 77112 89248 91850 101612 104214
Eternia# 280810 287490 311880 318120 325020 331260
Enigma# 436499 436499 455434 458504 465541 468611
Sky City# 745183 792210 880021 915801 906383 942163
Source: Company, ICICIdirect.com Research
Note : * Yet to reach threshold # Basis area opened for booking ** Calculated on carpet area
ICICI Securities Ltd | Retail Equity Research Page 6
Rental, hospitality portfolio – Icing on the cake…
ORL also enjoys a strong leasing and profitable hospitality portfolio
wherein it has Commerz I & II (Commercial Space), Oberoi Mall (Retail
Property) and The Westin Mumbai Garden City (Hospitality).
In the leasing portfolio, ORL has leased out ~0.9 mn sq feet (~94% of the
total available area) in Commerz I and Oberoi Mall. Beside this, ORL has
also completed Commerz-II Phase I (0.7 mn sq ft). Recently, it concluded
a deal with Teva Pharmaceuticals to lease out ~1 lakh sq ft. Furthermore,
Samsung India Electronics has leased ~1.1 lakh sq ft space in Oberoi
Commerz II in Goregaon for ~| 145/ sq ft per month. The lease is for nine
years with 15% rental escalation every three years. Overall, the lease
revenue is expected to grow to | 266.0 crore in FY20E vs. | 173.0 crore in
FY17 driven by the incremental leasing in Commerz II phase I.
Exhibit 6: Leasing trend
0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
0.6 0.70.5 0.5 0.5
0.50.5
0.5
0.50.5
0.8 0.9 0.90.9
1.0
1.2
1.41.5
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(m
n s
q f
t)
Commerz I Commerz II Phase I Oberoi Mall
Source: Company, ICICIdirect.com, Research
Exhibit 7: Leasing revenue trend
46 48 47 47 46 43 43 43
86110
79 8794 94
100
107
111
113
126135
147 150
173
210
241
266
0
75
150
225
300
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore)
Commerz I Commerz II Phase I Oberoi Mall
Source: Company, ICICIdirect.com, Research
ORL also has The Westin Mumbai Garden City Hotel in Goregaon, which
is part of the mixed development in Oberoi Garden City. It is a five star
hotel with 269 rooms and is managed by the Westin Group. In FY17, it
reported a revenue and EBITDA of | 126.6 crore and | 34.5 crore,
respectively. Going ahead, we expect it to post a topline and bottomline
of | 151.6 crore and | 53.1 crore, respectively, in FY20E.
Exhibit 8: Hotel revenue trend
122.8128.0 126.6
131.2
141.0
151.6
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore
)
Source: Company, ICICIdirect.com, Research
Exhibit 9: Westin’s operating profit trend
33.0
41.6
43.6
45.2
48.6
53.1
32.5
26.9
34.5
34.534.5
35.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore)
24
27
30
33
36(%
)
EBITDA Margins (RHS)
Source: Company, ICICIdirect.com, Research
ICICI Securities Ltd | Retail Equity Research Page 7
Exhibit 10: Operational trend in Oberoi’s rental and hospitality portfolio
Particulars Q2FY18 Q1FY18 Q4FY17 Q3FY17 Q2FY17
Oberoi Mall (Retail Property)
Operating Revenue (| crore) 26.8 26.7 25.7 25.3 24.7
EBITDA margin (%) 73.4 92.7 93.3 93.9 93.6
Occupancy (%) 98.7 99.1 99.7 99.9 90.9
Realisation (|/sqft/month) 164 162 155 152 164
Commerz I (Commercial Space)
Operating Revenue (| crore) 11.1 12.0 12.0 12.0 11.8
EBITDA margin(%) 99.0 99.6 99.5 98.8 100.3
Occupancy (%) 82.1 88.5 88.5 88.5 88.5
Realisation (|/sqft/month) 142 142 142 142 140
Commerz II Phase I (Commercial Space)
Operating Revenue (| crore) 12.6 11.5 8.2 7.3 4.1
EBITDA margin(%) 82.8 84.2 80.4 68.4 49.6
Occupancy (%) 44.7 44.7 29.9 29.9 27.1
Realisation (|/sqft/month) 130 119 126 114 125
The Westin Mumbai Garden City
(Hospitality)
Operating Revenue (| crore) 29.2 30.1 33.9 34.6 29.5
EBITDA margin(%) 31.8 34.5 38.9 39.4 28.8
Average Room Rate (|) 8209 8030 8532 8889 8226
Occupancy (%) 78.0 81.6 85.7 81.5 75.0
RevPAR (|) 6416 6546 7312 7255 6173
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
Revenues recognised to grow at 50.1% CAGR over FY18-20E…
Revenues de-grew 20.9% YoY to | 1113.7 crore in FY17 in the absence of
any new project hitting the revenue recognition threshold and slow sales
momentum. Going forward, we expect ORL’s revenues to grow robustly
at 50.1% CAGR over FY18-20E to | 2835.7 crore as its Mulund, Borivali
and Worli projects are expected to hit revenue recognition threshold in
the next couple of years. More revenues are expected to get recognised
from completed projects such as Oberoi Exquisite.
Exhibit 11: Revenues to grow at 50.1% CAGR over FY18-20E…
1,408.1
1,113.7
1,258.7
2,835.72,983.9
500
1000
1500
2000
2500
3000
3500
FY16 FY17 FY18E FY19E FY20E
(|
crore)
CAGR - 50.1%
Source: Company, ICICIdirect.com Research
EBITDA margin to contract ahead…
The EBITDA margin has dropped significantly in FY16 to 47.4%. However,
with a change in the project mix, margins rose to 51.2% in FY17. Going
ahead, we expect margins to be in the range of 46-50% given the larger
share of residential revenues recognition, which is typically of lower
margins compared to hospitality and leasing segments.
Exhibit 12: EBITDA margin trend
47.4
51.2 52.9
50.0
46.9
35
40
45
50
55
60
FY16 FY17 FY18E FY19E FY20E
(%
)
Source: Company, ICICIdirect.com Research
ORL’s revenues are expected to grow at a CAGR of 50.1%
CAGR during FY18-20E
ICICI Securities Ltd | Retail Equity Research Page 9
Net profit to grow at 38.0% CAGR during FY18-20E…
Overall, we expect ORL’s bottomline to grow at a CAGR of 51.8% during
FY18-20E to | 814.0 crore, with Eternia, Enigma & SkyCity projects hitting
revenue recognition during this period. This would aid the bottomline
significantly, going forward.
Exhibit 13: PAT to grow at 38.0% CAGR during FY18-20E
425.9 378.7 427.2 940.7 814.0
0
250
500
750
1000
FY16 FY17 FY18E FY19E FY20E
(|
crore)
CAGR - 38.0%
Source: Company, ICICIdirect.com Research
Return ratio to improve over FY18-20E…
Given the lower revenue recognition and profitability in FY17, ORL’s
return ratio dropped to single digit in FY17. However, with better
revenues and profitability coming in FY18E & FY19E, we expect ORL’s
return ratio to bounce to levels of 14.4% RoCE and 10.7% RoE in FY20E.
Exhibit 14: Return ratio to bounce back
11.3
8.0
8.6
8.4
17.4
14.4
6.67.0
13.7
10.7
0
4
8
12
16
20
FY16 FY17 FY18E FY19E FY20E
(%
)
RoCE RoNW
Source: Company, ICICIdirect.com Research
We expect ORL’s bottomline to grow at a CAGR of 38.0%
during FY18-20E to | 814.0 crore, with Eternia & Enigma
projects hitting revenue recognition during this period
ICICI Securities Ltd | Retail Equity Research Page 10
Outlook and Valuation
We like the company given the quality of land bank, its healthy balance
sheet and management bandwidth to execute large projects. Even the
sales performance has shown signs of improvement. We roll over our
valuations to FY20E. However, the stock has run up ~35% in the last six
months. So, we await a better entry point. Hence we continue to maintain
our HOLD recommendation on the stock with a revised TP of | 490.
Exhibit 15: Valuation
Location Type Status
Saleable Area ( in mn
sq ft) NAV NAV Multiple Value (| cr) |/share
Goregaon 10.1 8,419.3 7,801.2 230.0
Oberoi Mall Retail Completed 0.6 1,346.5 1.0 1,346.5 39.7
Commerz I Commercial Completed 0.4 539.0 1.0 539.0 15.9
Westin Hotel Completed 0.4 1,076.0 1.0 1,076.0 31.7
Exquisite I Residential Ongoing 1.5 221.6 1.0 221.6 6.5
Exquisite II Residential Ongoing 1.5 757.7 1.0 757.7 22.3
Commerz II Phase I Commercial Ongoing 0.7 1,555.6 0.9 1,400.0 41.3
Exquisite III Residential Planned 1.9 1,269.2 1.0 1,269.2 37.4
Commerz II Phase II Commercial Planned 1.7 1,541.9 0.7 1,079.3 31.8
Oberoi International school Social Infrastructure Ongoing 0.3
Education complex Planned 0.9
Hospital Planned 0.4
Andheri/Khar/Borivali 3.1 3,644.8 3,613.2 106.5
Oberoi Maxima Commercial Ongoing 0.3 242.9 0.9 218.6 6.4
Oberoi Prisma Residential Ongoing 0.7 142.1 1.0 142.1 4.2
Oberoi Splendour IT park Commercial Planned 0.1 73.7 0.9 66.3 2.0
Oberoi Splendour school Social Infrastructre Planned 0.4 14.7 1.0 14.7 0.4
Borivali Residential 4.5 3,171.6 1.0 3,171.6 93.5
Worli 3.4 2,168.7 1,873.3 55.2
Oasis Residential Residential Ongoing 2.3 691.8 1.0 691.8 20.4
Oasis Commercial Commercial Ongoing 0.2 121.2 0.8 97.0 2.9
Oasis Mall Retail Ongoing 0.1 61.4 0.8 49.1 1.4
Oasis Hospitality Hospital Ongoing 0.2 83.6 0.8 66.9 2.0
I-Ventures Residential 0.5 1,210.6 0.8 968.5 28.6
Thane Residential Planned 10.2 2,216.7 1.0 2,216.7 65.3
Mulund 3.2 1,463.4 1,463.4 43.1
Eternia Residential Ongoing 1.6 682.0 1.0 682.0 20.1
Enigma Residential Ongoing 1.6 781.3 1.0 781.3 23.0
Pune 1.3 100.4 93.8 2.8
Sangam city - Residential Residential Planned 0.8 67.3 1.0 67.3 2.0
Sangam city - Commercial Commercial Planned 0.3 16.8 0.8 13.5 0.4
Sangam city - Retail Retail Planned 0.3 16.3 0.8 13.0 0.4
Net cash/ (Debt) (373.8) 1.0 (373.8) (11.0)
Total 31.4 17,639.5 0.9 16,687.7 492
Rounded off Target price 490
111.9 1.0 111.9 3.3
Source: Company, ICICIdirect.com Research
Exhibit 16: Valuation
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY17 1113.7 -20.9 11.2 -11.1 43.9 26.9 6.6 8.6
FY18E 1258.7 13.0 12.6 12.8 39.0 23.5 7.0 8.4
FY19E 2983.9 137.1 27.7 120.2 17.7 10.4 13.7 17.4
FY20E 2835.7 -5.0 24.0 -13.5 20.4 11.4 10.7 14.4
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
Recommendation History vs. Consensus
0
150
300
450
600
750
Jan-18Nov-17Aug-17May-17Feb-17Nov-16Aug-16May-16Feb-16Nov-15Aug-15Jun-15Mar-15Dec-14
(|
)
0.0
20.0
40.0
60.0
80.0
100.0
(%
)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Jun-15 Oberoi Realty approves raising of | 324 crore through preferential issue of shares to Aranda Investments, an indirect subsidiary of Temasek Holdings
Aug-15 As per media sources, Oberoi Realty to buy Crompton Greaves’ Worli building spread over ~1 acre for over | 200 crore.
Oct-15 Oberoi Realty launches its multi-tower project “Sky City” at Borivali spread across 25 acres consisting of multiple towers of up to 60 storeys each. The project has a
saleable area of ~4.5 million square feet (msf) and the company expects to earn revenues of ~| 6000-7000 crore from the project
Mar-16
The Bombay High Court stays new constructions of either residential/commercial buildings or hotels in Mumbai from March 1, 2016 because the state government
and Brihanmumbai Municipal Corporation (BMC) have failed to comply with the municipal solid waste (MSW) rules at Deonar and Mulund dumping grounds,due to
which Oberoi will be unable to launch projects until the ban is lifted
Mar-16 Rajya Sabha passes the real estate regulation bill paving the way for regulation in the real estate sector. The bill would promote timely execution of projects, ensure
speedy adjudication of disputes and help promote private participation, positive for Oberoi
Apr-16 Swedish furniture retailing giant Ikea in talks with Oberoi Realty to buy a built-to-suit retail space for over | 900 crore in Borivali. As per media reports, if the deal
happens, this will monetise Oberoi's landbank at better prices of ~| 112.5 crore per acre vs. Oberoi's acquisition price of ~| 46.2 crore per acre
May-16 Oberoi allots 59,104 equity Shares of | 10 each to certain option grantee(s) pursuant to exercise by them of options granted to them under Company’s Employee
Stock Option Scheme 2009. The exercise price for options is | 260/ share. Post allotment, share capital has increased to | 339.4 crore.
Aug-16
According to media sources, Oberoi Realty is in talks with US-based investor Morgan Stanley and Singapore’s sovereign fund, GIC, to set up a joint venture (JV) for
developing malls. The venture would have a corpus of | 1,000 crore. Oberoi is expected to hold about 75%. Further, it could also initiate talks with Canada Pension
Plan Investment Board, which has shown an interest in buying in malls
Sep-16 Teva Pharmaceuticals buys ~1.0 lakh sq ft space in Oberoi Commerz II in Goregaon
Mar-17 Samsung India Electronics leases ~1.1 lakh sq ft space in Oberoi Commerz II in Goregaon for ~| 145/ sq ft per month. The lease is for nine years with 15% rental
escalation every three years
Sep-17 Oberoi Realty has acquired GlaxoSmithKline (GSK) Pharmaceuticals’ 60 acre land parcel at Thane for | 555 crore.
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Oberoi (Vikas Ranvir) 31-Dec-17 62.7% 212.9 0.0
2 R S Estate Developers Pvt. Ltd. 31-Dec-17 9.8% 33.3 0.0
3 Franklin Advisers, Inc. 31-Dec-17 3.1% 10.4 0.0
4 Franklin Templeton Investment Management Ltd. 31-Dec-17 3.1% 10.4 0.0
5 Aranda Investments (Mauritius) Pte. Ltd. 30-Sep-17 2.0% 6.7 -2.5
6 APG Asset Management 31-Dec-17 1.7% 5.6 0.0
7 L&T Investment Management Limited 31-Dec-17 1.3% 4.5 0.2
8 OppenheimerFunds, Inc. 31-Dec-17 1.2% 4.2 0.0
9 Wellington Management Company, LLP 31-Dec-17 1.2% 4.0 0.0
10 BlackRock Asset Management North Asia Limited 30-Sep-17 0.9% 3.2 0.0
(in %) Mar-17 Jun-17 Sep-17 Dec-17
Promoter 72.5 72.5 72.5 72.5
FII 25.4 25.4 24.9 22.6
DII 0.3 0.6 0.7 2.9
Others 1.8 1.6 1.8 2.0
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value (m) Shares (m) Investor name Value (m) Shares (m)
FIL Investment Management (Hong Kong) Limited 2.2 0.3 Aranda Investments (Mauritius) Pte. Ltd. -16.1 -2.5
L&T Investment Management Limited 1.2 0.2 BlackRock Investment Management, LLC -2.8 -0.5
DHFL Pramerica Asset Managers Private Limited 0.9 0.1 FIL Investment Management (Singapore) Ltd. -2.8 -0.4
Wellington International Management Company Pte. Ltd. 0.8 0.1 BlackRock Financial Management, Inc. -1.2 -0.2
UTI Asset Management Co. Ltd. 0.8 0.1 Franklin Templeton Investments (Asia) Ltd. -0.7 -0.1
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 12
Financial summary
Profit and loss statement (| Crore)
(Year-end March) FY17 FY18E FY19E FY20E
Net Sales 1,098.1 1,253.6 2,978.2 2,829.5
Other Operating Income 15.6 5.1 5.7 6.2
Total Operating Income 1,113.7 1,258.7 2,983.9 2,835.7
Growth (%) -20.9 13.0 137.1 -5.0
Operating Costs 437.1 475.7 1,369.6 1,375.2
Employee Expenses 64.2 67.4 70.7 74.3
Other Expenses 42.3 44.5 46.7 49.0
Total Operating Expenditure 543.6 587.5 1,487.0 1,498.5
EBITDA 554.6 666.1 1,491.2 1,331.0
Growth (%) -16.9 16.8 123.9 -10.7
Depreciation 49.5 51.3 52.5 53.7
Interest 5.6 6.0 60.7 91.1
Other Income 47.3 23.7 26.0 28.6
PBT 562.4 632.5 1,404.0 1,214.9
Prior Period Adjustments 0.0 0.0 0.0 0.0
Total Tax 186.9 208.7 463.3 400.9
PAT before profit from associates 375.6 423.8 940.7 814.0
Minoriy Interest 0.0 0.0 0.0 0.0
Profit from associates 3.1 3.5 80.7 16.1
PAT 378.7 427.2 940.7 814.0
EPS (|) 11.2 12.6 27.7 24.0
Source: Company, ICICIdirect.com Research
Cash flow statement (| Crore)
(Year-end March) FY17 FY18E FY19E FY20E
Profit after Tax 378.7 427.2 940.7 814.0
Depreciation 49.5 51.3 52.5 53.7
Interest 71.8 6.0 60.7 91.1
Others -46.2 -23.7 -26.0 -28.6
Net Increase in Current Assets -475.2 -114.7 -1757.4 -399.6
Net Increase in Current Liabilities 190.7 -562.4 995.6 44.8
Net cf from operating activities 173.6 -216.4 266.1 575.3
(Purchase)/Sale of Fixed Assets -76.3 -25.0 -25.0 -25.0
Others -46.2 -23.7 -26.0 -28.6
Net cf from Investing Activities -438.9 -1.4 1.0 3.6
Inc / (Dec) in Equity Capital 6.0 0.0 0.0 0.0
Inc / (Dec) in Loan Funds -18.0 650.0 0.0 0.0
(Payment) of Dividend & Div. Tax 0.0 -64.1 -141.1 -122.1
Interest paid -52.5 -6.0 -60.7 -91.1
Net cf from Financing Activities 335.6 579.9 -201.8 -213.2
Net Cash flow 39.8 362.2 65.3 365.7
Opening Cash/Cash Equivalent 311.9 351.7 713.9 779.1
Closing Cash/ Cash Equivalent 351.7 713.9 779.1 1,144.9
Source: Company, ICICIdirect.com Research
Balance sheet (| Crore)
(Year-end March) FY17 FY18E FY19E FY20E
Equity Capital 339.5 339.5 339.5 339.5
Preference Capital 0.0 0.0 0.0 0.0
Reserve and Surplus 5,386.4 5,749.6 6,549.1 7,241.0
Total Shareholders funds 5,726.0 6,089.1 6,888.7 7,580.5
Total Debt 868.6 1,518.6 1,518.6 1,518.6
Total Liabilities 8,454.1 8,904.8 10,700.1 11,436.7
Assets
Gross Block 1,042.8 1,067.8 1,092.8 1,117.8
Less Accumulated Depreciation 98.3 149.5 202.0 255.6
Net Block 944.5 918.2 890.8 862.1
Capital WIP 109.5 109.5 109.5 109.5
Total Fixed Assets 1,054.0 1,027.7 1,000.3 971.6
Goodwill on consolidation 0.0 0.0 0.0 0.0
Investments 1,824.3 1,824.3 1,824.3 1,824.3
Inventory 3,766.4 4,137.6 4,870.7 5,332.6
Debtors 105.8 143.1 171.7 206.1
Loans and Advances 1,234.0 940.2 1,935.8 1,839.2
Cash 351.7 713.9 779.1 1,144.9
Other Current Assets 0.0 0.0 0.0 0.0
Total Current Assets 5,457.8 5,934.7 7,757.4 8,522.7
Creditors 1,855.2 1,292.7 2,288.4 2,333.2
Provisions 4.4 4.4 4.4 4.4
Net Current Assets 3,598.2 4,637.6 5,464.7 6,185.2
Deferred Tax Assets 118.1 118.1 118.1 118.1
Total Assets 8,454.1 8,904.8 10,700.1 11,436.7
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY17 FY18E FY19E FY20E
Per share data (|)
EPS 11.2 12.6 27.7 24.0
Cash EPS 12.6 14.1 29.2 25.6
BV 168.6 179.3 202.9 223.3
Operating profit per share 17.4 20.3 45.4 40.6
Cash Per Share 10.4 21.0 22.9 33.7
Operating Ratios (%)
EBITDA Margin 51.9 53.1 50.1 47.0
PBT / Net Sales 51.2 50.5 47.1 42.9
PAT Margin 34.2 33.8 31.6 28.8
Inventory days 1,252 1,205 597 688
Debtor days 35 42 21 27
Creditor days 618 378 281 302
Return Ratios (%)
RoE 6.6 7.0 13.7 10.7
RoCE 8.6 8.4 17.4 14.4
RoIC 12.4 12.7 25.8 21.6
Valuation Ratios (x)
P/E 43.9 39.0 17.7 20.4
EV / EBITDA 26.9 23.5 10.4 11.4
EV / Net Sales 14.0 12.5 5.2 5.4
Market Cap / Sales 15.2 13.3 5.6 5.9
Price to Book Value 2.9 2.7 2.4 2.2
Solvency Ratios (x)
Debt / EBITDA 1.5 2.3 1.0 1.1
Debt / Equity 0.2 0.2 0.2 0.2
Current Ratio 2.7 4.0 3.0 3.2
Quick Ratio 0.7 0.8 0.9 0.9S
ource: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
ICICIdirect.com coverage universe (Real Estate)
CMP M Cap
(|) TP(|) Rating (| Cr) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
Oberoi Realty (OBEREA) 490 490 Hold 16,082 11.2 12.6 27.7 43.9 39.0 17.7 26.9 23.5 10.4 2.9 2.7 2.4 6.6 7.0 13.7
Mahindra Lifespace (GESCOR) 503 570 Buy 2,055 24.9 13.7 21.5 9.8 28.3 25.4 7.5 40.4 48.9 1.4 1.3 1.2 18.0 5.9 6.0
Sobha (SOBDEV) 511 575 Buy 5,011 16.4 20.2 27.0 31.2 25.2 18.9 16.9 13.8 11.4 1.9 1.8 1.7 6.1 7.1 9.0
Sunteck Realty (SUNRE) 390 440 Buy 4,680 14.8 16.9 22.7 16.7 14.7 10.9 12.3 9.2 6.8 1.9 1.3 1.2 11.6 8.9 10.9
P/B (x) RoE (%)
Sector / Company
EPS (|) P/E (x) EV/EBITDA (x)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 14
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
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Road No 7, MIDC,
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Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 15
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