Rs.

271

Target Price: Rs.326

Potential Upside:20.3%
Absolute Rating: BUY

Realty

Oberoi Realty Ltd.

22nd July 2015

| For private circulation only

Oberoi Realty Limited (Oberoi), a Mumbai-based real estate developer incorporated in 1998, primarily focuses on developing residential property but it has
also diversified into retail Mall, commercial, hospitality and social infrastructure projects. Oberoi has delivered about 5 million sq. ft. of developed real estate
across 35 projects so far. The stock price has corrected by about 20% in the last 5 months we firmly believe that this provides an opportunity to buy the stock
for both short and long-term investment perspectives for the following reasons:

Oberoi Realty: Reputed Brand, Successful Track record and Quality Management
The management of Oberoi is very smart historically it is known for buying real estate properties at the down-turn. Unlike many of its its
peers, Oberoi has been prudent in its land acquisition. In the last decade, it has done only seven or eight acquisitions (including JVs) that have kept its balance
sheet healthy. It has got a good track record of delivery and also strong brand reputation. Its brand image is evident from the fact that its formal launch of
Mulund project received 200 booking on the very first day and in less than 3 months of launch, it generated order book of over Rs.1,000 crore for
this project. It is quite commendable considering the state of realty business in this country at this juncture;

Strong Balance Sheet

Oberoi is one of the rare real estate plays in the listed space as its net debt (Rs.543 crore) stands at mere 12% of its net worth (Rs.4,634 crore) as of March
31, 2015. Receivables at the end of FY2015 were just Rs.83 crore while its annual sales were Rs.910 crore for FY2015. This is quite unique
achievement considering the fact there are many real estate companies for which the receivables match almost their annual sales. Its interest costs were
almost zero for the June 2015 quarter. In this month, Oberoi raised over Rs.324 crore by allotting 1.1 crore number of shares at a price of Rs.295 per
share to a foreign portfolio investor, Aranda Investments, which is an indirect subsidiary of Temasek Holdings. This would further improve its balance sheet
significantly;

Stock Data
Market cap

: Rs.8911 crore

52 week high/low

: Rs 334/ 203

Avg. daily vol. (3mth) : 2,66,174

NSE code

: OBEROIRLTY

BSE code

: OBEROIRLTY

Shareholding (%)

Jun-15 Mar-15

Promoters

74.99

75.00

FIIs

16.95

18.53

DIIs

2.90

0.92

Others

5.16

5.55

Oberoi Mall and commercial complexes hold significant Growth potential

Currently, Oberoi has three operational assets: Oberoi Mall (a retail Mall with 0.6 mn sq ft ); Commerz-I (a business complex with 0.4 mn sq ft) and a five star
Hotel (Westin Hotel with 269 rooms). Beside this, Oberoi has also completed Commerz-II Phase I (0.7 mn sq ft) both these complexes are believed to have an
occupancy rate of 84%. Oberoi Mall is one of the most successful malls in the country and has got occupancy rate of almost close to 100%. These
properties are located in attractive locations in Mumbai and this kind of occupancy rates assures potential for significant revision of rentals going forward.
Further, Oberoi entered into an agreement with the Ritz Carlton (which operates 85 hotels worldwide) as a hospitality partner to establish an iconic hotel,
the first for the global brand in Mumbai (Worli). As a result, The Ritz-Carlton and luxury residences managed by The Ritz-Carlton in Worli (Mumbai) will help
create a new Indian benchmark in the niche bespoke end of lifestyle exclusiveness, making it truly iconic;

Equinomics Research & Advisory Private Limited - Investment Adviser

Founder & Managing Director

Mr. G. Chokkalingam
chokka.g@equinomics.in

Investment Rationale Cont

Posted Impressive Results in the June quarter
Oberoi Realty has posted quite impressive results for June 2015 quarter while its sales have gone up 20.6% yoy, its PBIT has increased by 32.5%. However, its net profit moved up only by
23.7% as its tax outgo has gone by 41.5% which is 34% of its profit before tax. In this economic environment, posting even 24% yoy growth in net profit with similar growth in sales by
a realty company is really quite impressive;

Expecting steep increase in sales volume in the coming years

We anticipate Oberoi Realtys sales volume to pick up significantly going forward on the back of a slew of launches in Q4FY2015 and H1FY2016. Oberoi has launched two luxury
residential projects in Mulund, Mumbai. Both projects are spread across nine acres and would collectively be ~3.2 mn sq ft in size. Going ahead, the company is looking to launch
its other large size projects in Mumbai in places like Worli (1.7 mn sq ft) and Borivali (~4.5 mn sq ft) in FY2016. With a slew of launches, we expect sales volumes to jump from 0.3
mn sq ft in FY2014 to 2.8 mn sq ft in FY2017E. Oberois core operations should see a gradual improvement driven by rising visibility of 3-4 key launches over next 2-3 quarters, and gradual
uptick in consumer sentiment. Start of new monetization cycle is expected to benefit cash flows and capital efficiencies disproportionately due to higher mix of completed/ near
completed assets;
Outlook and valuation
The recent cash-infusion by a foreign investor would be a positive trigger for its performance in the short-term itself. The RBI has permitted foreign investors to invest up to 30% of the
paid-up capital of the company. The foreign stake, including the latest capital infusion, would be around 20% and there is a possibility of increase in the buying interest by the foreigners in
the stock. Tactically also the stock can possibly play out in a big way as and when the attraction in the realty sector comes back from the equity investors - the floating stock (after
netting out the stakes held by the promoters, foreigners and the domestic institutions) is just about 5%. It would be worth to recall the fact that many fundamentally sound stocks
which also had public holding in a single digit saw massive expansion of PEs in the recent times. Given the quality of its land bank, healthy balance sheet and management bandwidth to
execute projects along with anticipated pick-up in sales volume with new launches such as Mulund, Prisma and Worli, we reiterate our BUY rating with a target price Rs.326.
Disclosure: I, G.Chokkalingam, do not hold the stock directly or indirectly. However, we do hold this share for most of our clients

Financial Summary (Consolidated)

Net Sales
(Rs Cr)

Change
(%)

PAT
(Rs Cr)

Change
(%)

EPS
(Rs)

Change
(%)

P/E
(x)

FY14

784

-24.7

311

-38.4

9.5

-38.4

28.6

FY15

911

16.2

317

1.9

9.7

1.9

28.1

FY16E

1,500

64.6

500

57.7

14.7

51.5

18.4

FY17E

2,500

66.7

850

70.0

25.1

70.7

10.7

Y/E Mar (Rs Cr)

Source: Company, Equinomics Research & Advisory Private Ltd

Equinomics Research & Advisory Private Limited - Investment Adviser

Disclaimer
Stock Disclosure: Whether Stock Held By:

Oberoi Realty

G.Chokkalingam & Family

Equinomics

NO

NO

Equinomics Research & Advisory Private Ltd - Investment Adviser (SEBI REG. NO. INA000001712)
G. Chokkalingam - Founder & Managing Director
Head Office Mumbai . 18 - A/3, Ekta CHS, Shivdham Complex, Opposite Fire Brigade, Near Oberoi Mall, Malad (East), Mumbai - 400097
Ph: +91 22 28492941 | Email: chokka.g@equinomics.in
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