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INSTITUTIONAL EQUITY RESEARCH
Page | 1 | PHILLIPCAPITAL INDIA RESEARCH Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA-member broker-dealer.
Oberoi Realty (OBER IN)
Pre-sales momentum holds up strong; expected to sustain
INDIA | REAL ESTATE | Quarterly Update
26 July 2019
Top takeaways from Q1FY20
Revenue growth almost in line with our expectations (-4%), lower than consensus (-9%).
Higher borrowing cost lead to PAT miss (vs. us/consensus by -11%/-31%).
Key project updates: 1) Highest ever pre-sales in Sky City Project (74 units, Rs 1.9bn); (2) Mulund project saw marginal revival (qoq) in pre-sales but still a concern; (3) Three Sixty West sales stayed muted (no sales in Q1), remain a drag; (4) Commerz II Phase I attained 96% occupancy; 22% higher qoq.
Maintain BUY as we don’t see major risk to our investment thesis as initiated in our
detailed sector report. Click here to read the report.
Key highlights: Revenue fell 32% yoy (primarily because of a high base on launch of subvention scheme in Q1 FY19). Adjusted EBITDA margins were 39% (met expectations). PAT margins fell 960bps yoy on Sky City’s higher contribution to revenue, and higher interest cost. Prisma inched closer to being 100% sold (10 units left). Esquire sales momentum remained steady while Esquisite sales stayed muted. Eternia and Enigma pre-sales revived marginally qoq. Steady revenue continued from Westin, Oberoi Mall and Commerz, while Commerz II Phase I saw a jump in revenue on increased occupancy levels (to 96% from 74%).
Conference call takeaways
No adverse impact expected in case of possible ban on subvention scheme by banks/NBFCs; Oberoi's schemes already adhere to 25% payment by buyer, which provides comfort to lenders.
10-15% of the Thane project may be under the Aspire brand (Rs 10-20mn ticket size).
Goregaon Phase 3 and Thane expected to launch in Diwali; Borivali mall expected to be operational by November 2020.
Ritz Carlton Hotel delayed (Sep/Dec 2020) because of higher focus on completion of Three Sixty West’s residential component.
Marginal increase in debt: Internal accruals and raised debt to be used for constructing Sky City Mall.
Outlook and valuation: We maintain our estimates for FY20/21. We see pre-sales momentum continuing on sales from Sky City and to a certain extent from Esquire. We expect the sales from Three Sixty West, Eternia, Enigma, and Exquisite to remain laggards. Residential sales may get some backlash in case of a ban on subvention schemes by banks, but its annuity and hospitality verticals will keep the momentum going. Maintain target and rating.
Buy (Maintain) CMP RS 546 / TARGET RS 660 (+21%)
COMPANY DATA
O/S SHARES (MN) : 364
MARKET CAP (RSBN) : 199
MARKET CAP (USDBN) : 2.9
52 - WK HI/LO (RS) : 642 / 26
LIQUIDITY 3M (USDMN) : 3.7
PAR VALUE (RS) : 10
SHARE HOLDING PATTERN, %
Jun 19 Mar 19 Dec 18
PROMOTERS : 67.7 67.7 67.7
FII / NRI : 26.1 25.4 25.4
FI / MF : 3.9 4.4 4.5
NON PRO : 1.0 1.0 0.9
PUBLIC & OTHERS : 1.4 1.5 1.5
KEY FINANCIALS
Rs mn FY19 FY20E FY21E
Net Sales 25,786 36,821 35,458
EBIDTA 11,515 14,029 14,656
Net Profit 8,061 9,879 10,312
EPS, Rs 22.2 27.2 28.4
PER, x 24.6 20.1 19.3
EV/EBIDTA, x 17.3 14.3 13.7
ROE, % 10.1 11.1 10.4
Debt/Equity (%) 0.20 0.16 0.14
CHANGE IN ESTIMATES
__Revised Est. __ __% Revision__
Rs bn FY20E FY21E FY20E FY21E
Revenue 36,821 35,458 0% 0%
EBITDA 14,029 14,656 0% 0%
PAT 9,879 10,312 0% 0%
EPS (Rs) 27.2 28.4 0% 0% Dhaval Somaiya, Research Associate [email protected] Vaibhav Agarwal, Research Analyst [email protected]
(Rs bn) Q1FY20 Q1FY19 yoy
growth %
Q4FY19 qoq
growth %
vs.
expectations %
Comments
Net sales from operations 6,033 8,883 -32 5,735 -5 -4% Declined on YoY basis owing to high base in Q1 FY19
EBITDA 2,352 4,617 -49 2,097 -11 -1% Decline in EBITDA margin because of increased share of low
margin sky city volumes in overall pie EBITDA Margin (%) 39.0 52.0 -1299bps 36.6 -242bps
Depreciation (111) (106) 4 (110) -1
Interest (239) (49) 385 (38) -84 Borrowings for Malls lead to Interest cost increase
Other Income 149 71 108 238 60
Adj PAT 1,522 3,094 -50 1,558 2 -11% Low margin sales mix and higher borrowing cost drags PAT
Net Profit Margin 25.2 34.8 -960bps 27.2 192bps
EPS 5.1 5.8 -11 4.9 -4
Opening Cash and Cash Equivalents 1208 7673 97,379
Operating Cash Flows 2329 360 -11,753
Investing Cash Flows -8709 -5379 -37,611
Financing Cash Flows 11065 -708 -4,980
Closing Cash and Bank Balance * 13880 6071 76,738
D/E (x) 0.19 0.23 0.20
Page | 2 | PHILLIPCAPITAL INDIA RESEARCH
OBEROI REALTY QUARTERLY UPDATE
Quarterly trends
(Rs mn) 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20
Net Sales 3,562 3,450 8,883 5,921 5,286 5,735 6,033
% YoY 41.3% 19.1% 240.7% 95.1% 48.4% 66.2% -32.1%
Expenses (1,636) (1,616) (4,266) (2,963) (3,405) (3,638) (3,680)
EBITDA 1,926 1,834 4,617 2,958 1,881 2,097 2,352
EBITDA Margin (%) 54.1 53.1 52.0 50.0 35.6 36.6 39.0
% YoY 52.6% 21.3% 240.7% 80.7% -2.4% 14.4% -49.1%
Depreciation (122) (118) (106) (110) (114) (110) (111)
Interest and Finance Expenses (18) (19) (49) (58) (49) (38) (239)
Other Income 42 79 71 277 202 238 149
Exceptional Items 10 11 - - - - -
PBT 1,837.3 1,787 4,544 3,079 1,952 2,201 2,163
% YoY 46.5% 18.3% 244.5% 99.5% 6.3% 23.2% -52.4%
Provision for Tax (635) (357) (1,450) (940) (573) (644) (643)
-Tax Rate (%) 34.6 20.0 31.9 30.5 29.4 29.2 29.7
Net Profit 1,202 1,429.20 3,094.20 2,138.30 1,379.30 1,557.60 1,520.70
Net Profit Margin (%) 33.7 41.4 34.8 36.1 26.1 27.2 25.2
% YoY 41.9% 40.4% 238.6% 105.0% 14.8% 9.0% -50.9%
Reported PAT 1,209.6 1,431 3,097 2,141 1,382 1,560 1,523
% YoY 42.3% 40.9% 239.5% 104.5% 14.2% 9.0% -50.8%
No of shares (m) 339.6 339.6 363.6 363.6 363.6 363.6 363.6
EPS 3.56 4.21 8.52 5.89 3.80 4.29 4.19
Operating Cost 2,809.6 3217.8 3956 3,982 3,537 5,227 4,003
As a % of sales 78.9 93.3 44.5 67.2 66.9 91.1 66.3
% YoY 57.52% 44.07% 126.81% 111.81% 25.89% 62.44% 1.18%
Change In Inventories (1,494) (1,898) (201) (1,408) (562) (2,059) (796)
As a % of sales (42.0) (55.0) (2.3) (23.8) (10.6) (10.6) (10.6)
% YoY 90.0% 64.2% -73.7% 82.1% -62.4% 8.5% 295.1%
Employees cost 150 157 186 193 174 181 175
As a % of sales 4.2 4.5 2.1 3.3 3.3 3.2 2.9
% YoY -13.4% -7.7% 3.5% 4.1% 16.1% 15.4% -6.2%
Other expenditure 171 140 325 196 257 289 299
As a % of sales 4.8 4.1 3.7 3.3 4.9 5.0 5.0
% YoY 90.5% -18.2% 132.0% -39.7% 31.2% 12.4% 3.5%
Gross Profit 5,056 5,348 9,084 7,329 1,881 1,881 1,881
% Margin 142.0 155.0 102.3 123.8 35.6 32.8 31.2
% YoY 52.8% 32.0% 169.2% 92.5% -62.8% -64.8% -79.3%
Source: Company, PhillipCapital India Research
Project-Wise Details
Project Name
Pre-Sales (Rs mn) Units Area sold
till date (%) 1QFY19 1QFY20 % YoY 4QFY19 1QFY20 4QFY19 1QFY19
Oberoi Mall 354 396 11.8 390
NA
Commerz 107 104 -3 104
NA
Commerz II Phase 1 166 299 80 256
NA
Westin 309 320 4 372 NA
Exquisite 120 - -100 0 - - 3 92%
Esquire 2,673 1,240 (53) 978 27 19 54 78%
Prisma 263 164 (37) - 3 - 5 90%
Eternia 423 271 (36) 148 12 6 19 29%
Enigma 199.5 343.4 72 174 7 5 5 22%
Sky City 891 1,877 110 837 74 32 38 38%
Three Sixty West 1664 114 (93) 1051 - 3 4 24%
Source: Company, PhillipCapital India Research
Page | 3 | PHILLIPCAPITAL INDIA RESEARCH
OBEROI REALTY QUARTERLY UPDATE
Revenue trend
EBITDA trend- Marginal Revival in Q1 FY20
PAT trend - PAT margins decline in Q1 FY20 on account of spiked interest cost
Pre-sales (No. of units) : Remains Steady; Muted in terms of Mix compared on Y-o-Y basis
Pre-sales (in Rs. mn) : Remains Steady; Muted in because of tilted mix compared on Y-o-Y basis
Oberoi Mall Revenue (Rs. Mn) - Remains Steady
Source: Company, PhillipCapital India Research
-50%
0%
50%
100%
150%
200%
250%
300%
-
2,000
4,000
6,000
8,000
10,000Net Sales, Rs mn % YoY, rhs
0
10
20
30
40
50
60
-
1,000
2,000
3,000
4,000
5,000
EBITDA, Rs mn EBITDA Margin (%), rhs
0
10
20
30
40
50
-
500
1,000
1,500
2,000
2,500
3,000
3,500
Net Profit, Rs mn Net Profit Margin (%), rhs
0
20
40
60
80
100
120
140Three Sixty West
Sky City
Enigma
Eternia
Prisma
Esquire
Exquisite
-1000
0
1000
2000
3000
4000
5000
6000
7000Three Sixty West
Sky City
Enigma
Eternia
Prisma
Esquire
Exquisite
0
100
200
300
400
500Oberoi Mall Revenue (Rs mn)
Page | 4 | PHILLIPCAPITAL INDIA RESEARCH
OBEROI REALTY QUARTERLY UPDATE
Commercial Segment - Rise in revenue on account of higher occupancy in Commerz II -Phase I
Westin - Steady revenues continue
Source: Company, PhillipCapital India Research
0
50
100
150
200
250
300
350
Commerz II Phase I Commerz I
0
50
100
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350
400
Page | 5 | PHILLIPCAPITAL INDIA RESEARCH
OBEROI REALTY QUARTERLY UPDATE
Financials
Income Statement Y/E Mar, Rs mn FY18 FY19e FY20e FY21e
Net sales 12,654 25,786 36,821 35,458
Growth, % 14 104 43 -4
Other income 0 0 0 0
Total income 12,654 25,786 36,821 35,458
Raw material expenses -4,679 -12,472 -20,848 -18,704
Employee expenses -672 -734 -770 -809
Other Operating expenses -551 -1,066 -1,172 -1,290
EBITDA (Core) 6,753 11,515 14,029 14,656
Growth, % 18.5 70.5 21.8 4.5
Margin, % 53.4 44.7 38.1 41.3
Depreciation -491 -440 -540 -640
EBIT 6,262 11,074 13,489 14,016
Growth, % 20.3 76.8 21.8 3.9
Margin, % 49.5 42.9 36.6 39.5
Interest paid -56 -69 -194 -164
Other Non-Operating Income 266 788 788 788
Non-recurring Items 36 69 0 0
Pre-tax profit 6,496 11,737 14,113 14,731
Tax provided -1,907 -3,607 -4,234 -4,419
Profit after tax 4,589 8,130 9,879 10,312
Others (Minorities, Associates) 0 0 0 0
Net Profit 4,589 8,130 9,879 10,312
Growth, % 21.2 77.1 22.5 4.4
Net Profit (adjusted) 4,552 8,061 9,879 10,312
Unadj. shares (m) 340 364 364 364
Wtd avg shares (m) 340 364 364 364
Balance Sheet Y/E Mar, Rs mn FY18 FY19e FY20e FY21e
Cash & bank 1,167 4,253 1,543 1,304
Marketable securities at cost 135 3,388 3,388 3,388
Debtors 1,813 1,094 5,276 5,080
Inventory 42,467 41,655 41,994 45,710
Loans & advances 1,573 2,662 2,662 2,662
Other current assets 17,175 16,805 16,805 16,805
Total current assets 64,331 69,857 71,668 74,950
Investments 31,743 34,636 34,636 34,636
Gross fixed assets 2,798 1,978 16,247 22,904
Less: Depreciation -710 0 -1,691 -2,331
Add: Capital WIP 1,124 1,251 1,251 1,251
Net fixed assets 3,212 3,229 15,808 21,825
Non-current assets 1,503 2,215 2,215 2,215
Total assets 1,02,247 1,11,285 1,25,675 1,34,974
Current liabilities 32,976 22,953 30,336 30,195
Provisions 55 131 131 131
Total current liabilities 33,031 23,083 30,467 30,326
Non-current liabilities 8,293 7,910 5,910 5,910
Total liabilities 41,323 30,994 36,377 36,237
Paid-up capital 3,396 3,636 3,636 3,636
Reserves & surplus 57,528 76,656 85,662 95,101
Shareholders’ equity 60,924 80,292 89,298 98,737
Total equity & liabilities 1,02,247 1,11,285 1,25,675 1,34,974
Source: Company, PhillipCapital India Research Estimates
Cash Flow Y/E Mar, Rs mn FY18 FY19e FY20e FY21e
Pre-tax profit 6,496 11,737 14,113 14,731
Depreciation 491 440 540 640
Chg in working capital 1,160 -9,338 2,863 -3,662
Total tax paid -2,012 -3,486 -4,234 -4,419
Other operating activities -8,193 1,006 -266 -266
Cash flow from operating activities -2,058 359 13,016 7,024
Capital expenditure -312 -457 -13,119 -6,657
Chg in investments -8,571 -2,893 0 0
Chg in marketable securities 2,090 -3,254 0 0
Other investing activities 911 78 10,150 266
Cash flow from investing activities -5,882 -6,526 -2,968 -6,391
Free cash flow -7,941 -6,166 10,048 633
Equity raised/(repaid) 3,664 19,368 9,006 9,439
Debt raised/(repaid) -707 -901 -2,000 0
Dividend (incl. tax) 679 727 727 727
Other financing activities 2,874 -19,827 -10,606 -11,039
Cash flow from financing activities 6,510 -633 -2,873 -873
Net chg in cash -1,431 -6,799 7,175 -240
Valuation Ratios
FY18 FY19e FY20e FY21e
Per Share data
EPS (INR) 13.4 22.2 27.2 28.4
Growth, % 21.2 65.4 22.5 4.4
Book NAV/share (INR) 179.4 220.8 245.6 271.6
FDEPS (INR) 13.4 22.2 27.2 28.4
CEPS (INR) 14.7 23.2 28.7 30.1
CFPS (INR) 13.0 (1.5) 34.4 17.9
DPS (INR) (2.0) (2.0) (2.0) (2.0)
Return ratios
Return on assets (%) 5.0 7.8 8.5 8.0
Return on equity (%) 7.5 10.0 11.1 10.4
Return on capital employed (%) 6.9 10.6 10.9 10.4
Turnover ratios
Asset turnover (x) 0.4 0.7 0.8 0.6
Sales/Total assets (x) 0.1 0.2 0.3 0.3
Sales/Net FA (x) 3.8 8.0 3.9 1.9
Working capital/Sales (x) 2.4 1.5 1.0 1.1
Receivable days 52.3 15.5 52.3 52.3
Inventory days 1,224.9 589.6 416.3 470.5
Payable days 80.9 53.3 61.0 64.3
Working capital days 865.8 554.2 359.7 411.3
Liquidity ratios
Current ratio (x) 1.9 3.0 2.4 2.5
Quick ratio (x) 0.7 1.2 1.0 1.0
Interest cover (x) 91.3 57.2 82.2 195.2
Total debt/Equity (%) 15.5 10.4 7.1 6.4
Net debt/Equity (%) 13.6 5.1 5.4 5.1
Valuation
PER (x) 40.7 24.6 20.1 19.3
PEG (x) - y-o-y growth 1.9 0.4 0.9 4.4
Price/Book (x) 3.0 2.5 2.2 2.0
EV/Net sales (x) 15.3 7.7 5.4 5.6
EV/EBITDA (x) 28.7 17.3 14.3 13.7
EV/EBIT (x) 30.9 18.0 14.8 14.3
Page | 6 | PHILLIPCAPITAL INDIA RESEARCH
OBEROI REALTY QUARTERLY UPDATE
Stock Price, Price Target and Rating History
Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.
Rating Criteria Definition
BUY >= +15% Target price is equal to or more than 15% of current market price
NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%
SELL <= -15% Target price is less than or equal to -15%.
Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.
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This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.
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B (TP 660)
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J-17 J-17 A-17 O-17 N-17 J-18 F-18 A-18 M-18 J-18 A-18 S-18 N-18 D-18 F-19 M-19 M-19 J-19
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OBEROI REALTY QUARTERLY UPDATE
Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.
Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in
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research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for
any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for
the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in
connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:
Sr. no. Particulars Yes/No
1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL
No
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No
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No
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No
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OBEROI REALTY QUARTERLY UPDATE
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