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May 8, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
Ends year with better sales volumes…
Oberoi Realty's (ORL) Q4FY17 sales volumes grew 27.5%
sequentially to 1.35 lakh sq ft with sales value of | 345.4 crore. Sales
volumes were above our estimates of 1.23 lakh sq ft mainly on
account of higher-than-expected sales volume of 45427 sq ft in
‘Three Sixty West’ project (our expectation: 25000 sq ft)
Revenues grew 27.7% YoY to | 289.5 crore, in line with our estimate
of | 288.3 crore
The EBITDA margin expanded 680 bps YoY to 52.3% mainly on
account of a change in the project mix (our expectation of 48.7%)
Net income grew 57.7% YoY to | 101.8 crore, marginally above our
expectation of | 93.9 crore
The board of directors of the company have recommended a
dividend of | 2 per share for FY17
Posts strong sales volume growth in Q4FY17…
ORL’s sales volumes grew robustly at 27.7% QoQ to 1.35 lakh sq ft in
Q4FY17 on account of strong sales performance across projects. Sales
volumes were boosted by Three Sixty West and Prisma projects where it
managed to sell 45427 sq ft & 12364 sq ft, respectively. For FY17, the
company managed to clock sales volumes of 0.6 msf vs. 1.3 msf in FY16
due to demonetisation impact and absence of any new launches. With a
strong performance in Q4FY17, the management believes demonetisation
has turned out to be a non-event and expects a demand revival. Going
forward, the company would look to launch subsequent phases of
Borivali and Mulund projects. Also, in FY18E, it is planning to launch the
third phase of the Goregaon project. Consequently, we have built in sales
volumes of 1.7 msf in FY19E. Further, with revenue recognition from
newly launched projects, we expect topline, PAT to grow at 59.6%, 54.2%
CAGR to | 2836.6 crore, | 900.8 crore, respectively, in FY17-19E.
RERA to bring in consolidation in sector…
RERA has been implemented from May 1, 2017 in Maharashtra. RERA
seeks to bring clarity and fair practices that would protect the interests of
buyers and also impose penalties on errant builders. It would bring in
much needed transparency in the real estate sector and also consumer’s
confidence back into the sector. Though there could be some near term
hiccups during the transition phase towards RERA, over the long term, it
would benefit organised players like Oberoi as it would lead to
consolidation in the sector. Further, the management felt that RERA
implementation would not impact their routine operations.
Looking to commence operations at new malls by 2019-20…
ORL is looking to set up new malls in Worli and Borivali area. In Worli, the
company is planning a mixed use development of 1 mn sq ft (msf) on the
Glaxo land, which includes a luxury mall over 0.5 msf and a hotel and
some residential plots over the remaining area. The decision to develop
malls comes in the backdrop of success of existing malls in the region
and the demand for quality space from various brands. It is looking to
start operations at the Worli mall by 2019-20 and for hotel by 2019.
Await pick-up in sales volumes; maintain HOLD…
We like ORL given the quality of land bank, its healthy balance sheet &
management bandwidth to execute large projects. Though sales volumes
look strong sequentially, we await a meaningful pick-up in sales volumes,
going forward. Further, the recent rally in the stock (up ~21% in past
three months) leaves no room for upside. Hence, we continue to maintain
our HOLD recommendation on the stock with revised TP of | 385.
Rating matrix
Rating : Hold
Target : | 385
Target Period : 12 months
Potential Upside : -3%
What’s Changed?
Target Changed from | 333 to | 385
EPS FY18E Changed from | 26.3 to | 25.9
EPS FY18E Introduced at | 27.4
Rating Unchanged
Quarterly Performance
| crore Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)
Revenue 289.5 226.7 27.7 252.2 14.8
EBITDA 151.5 103.2 46.8 126.3 19.9
EBITDA (%) 52.3 45.5 680 bps 50.1 224 bps
PAT 101.8 64.6 57.7 84.3 20.8
Key Financials
| Crore FY16 FY17E FY18E FY19E
Net Sales 1,408.1 1,113.7 2,584.4 2,836.6
EBITDA 667.4 570.2 1,264.5 1,388.0
Net Profit 425.9 378.7 851.5 900.8
EPS (|) 13.0 11.5 25.9 27.4
Valuation summary
(x) FY16 FY17E FY18E FY19E
P/E 30.7 34.5 15.3 14.5
Target P/E 29.7 33.4 14.8 14.0
EV / EBITDA 19.9 22.8 9.7 8.8
P/BV 2.5 2.3 2.1 1.8
RoNW (%) 8.0 6.7 12.7 12.7
RoCE (%) 11.0 8.6 17.2 17.4
Stock data
Particular Amount (| crore)
Market Capitalization 13,063.9
Total Debt 901.6
Cash 395.3
EV 13,570.2
52 week H/L (|) 414 / 256
Equity capital 328.2
Face value (|) 10.0
Price performance (%)
Return % 1M 3M 6M 12M
Oberoi Realty 7.2 20.8 17.8 50.4
Sobha Limited 2.0 50.6 56.2 36.4
BSE Realty 17.0 34.7 34.3 47.0
Research Analyst
Deepak Purswani, CFA
Vaibhav Shah
Oberoi Realty (OBEREA) | 398
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
[
Q4FY17 Q4FY17E Q4FY16 YoY (Chg %) Q3FY17 QoQ (Chg %) Comments
Income from Operation 289.5 288.3 226.7 27.7 252.2 14.8 Revenues grew 27.7% YoY to | 289.5 crore and were in line with our estimate
of | 288.3 crore
Other Income 12.5 12.7 10.6 17.3 12.7 -1.7
Operating Cost 109.8 109.6 96.0 14.4 99.7 10.2
Employee cost 17.0 13.0 14.4 17.9 17.3 -1.6
Other expenditure 11.3 10.3 13.1 -14.3 9.0 25.3
EBITDA 151.5 140.5 103.2 46.8 126.3 19.9
EBITDA Margin (%) 52.3 48.7 45.5 680 bps 50.1 224 bps The EBITDA margin expanded 680 bps YoY to 52.3% mainly on account of a
change in the project mix
Depreciation 12.3 12.5 12.2 0.4 12.5 -1.8
Interest 1.4 1.5 0.1 1,957.1 1.5 -3.4
PBT 150.2 139.2 101.6 47.9 125.0 20.2
Taxes 49.2 45.3 37.0 33.1 40.7 21.0
PAT 101.8 93.9 64.6 57.7 84.3 20.8 PAT grew robustly at 57.7% YoY to | 101.8 crore, marginally above our
estimates of | 93.9 crore
Key Metrics
Sales Volume (in sq ft) 135,396 122,500 142,994 -5.3 106,214 27.5 Sales volume was above our estimates of 1.23 lakh sq ft mainly on account of
higher-than-expected sales volume of 45427 sq ft in ‘Three Sixty West project’
(our expectation: 25000 sq ft)
Source: Company, ICICIdirect.com Research
Change in estimates
FY19E
(| Crore) Old New % Change Introduced Comments
Revenue 1,113.7 2,587.4 2584.4 -0.1 2836.6 We have marginally tweaked our FY18E assumptions and introduced FY19E
numbers
EBITDA 570.2 1,311.9 1264.5 -3.6 1388.0
EBITDA Margin (%) 51.2 50.7 48.9 -177 bps 48.9
PAT 378.7 863.8 851.5 -1.4 900.8
EPS (|) 11.5 26.3 25.9 -1.4 27.4
FY17 FY18E
Source: Company, ICICIdirect.com Research
Assumptions
FY15 FY16 FY17 FY18E FY18E FY19E Comments
Volume sold in msf New Earlier Introduced
Goregaon 0.2 0.2 0.1 0.3 0.4 0.5
Andheri/Borivali 0.1 1.1 0.2 0.3 0.4 0.5
Worli 0.0 0.0 0.2 0.2 0.2 0.2
Mulund 0.7 0.0 0.1 0.2 0.3 0.3
Pune 0.0 0.0 0.0 0.0 0.2 0.2
Total 1.0 1.3 0.6 0.9 1.4 1.7 We have introduced FY19E estimates at 1.7 msf
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Conference call highlights:
Project updates: The company received approvals for an
additional residential area of 5.3 lakh sq ft in tower A of the Three
Sixty West project. Further, the management expects the Mulund
projects to hit the revenue recognition threshold probably by
FY18E end. The company also expects to complete construction
of Esquire project by December, 2017. It is also looking to sell the
remaining inventory in the Exquisite project in the next three
quarters. The management also expects the Worli project to hit
revenue recognition threshold
New launches: The company is looking to launch Phase III of
Goregaon Project in FY18
New mall on Glaxo land: In Worli, the company is planning a
mixed development of 1 msf on Glaxo land, which includes a
luxury mall over 0.5 msf & a five star hotel and some residential
plots over the remaining area. It is looking to start the operations
at mall by 2019-20 and hotel by 2019
Samsung Deal: Samsung India Electronics has leased ~1.1 lakh
sq ft space (four additional floors) in Oberoi Commerz II Phase I in
Goregaon
Demonetisation impact: The management believes that
demonetisation has turned out to be a non-event for the company
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Sales volumes to remain under pressure…
Sales volumes grew 27.7% sequentially to 1.35 lakh sq ft. They were
above our estimates of 1.23 lakh sq ft on account of higher-than-expected
sales volume of 45427 sq ft in ‘Three Sixty West project’ (our expectation:
25000 sq ft) and sales volumes of 12364 sq ft in Prisma project (our
expectation: 2500 sq ft). Furthermore, sales value was at | 345.4 crore for
Q4FY17. For FY17E, sales volumes were at 5.56 lakh sq ft. Going forward,
the company would look to launch subsequent phases of Borivali and
Mulund projects. Also, in FY18E, it is planning to launch the third phase of
the Goregaon project. Consequently, we have built in sales volumes of
1.7 msf in FY19E.
Exhibit 1: Sales volume picking up
7.5
0.8
0.6 1
.4
1.5
1.0
6
1.3
5
10.2
1.7
7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
(la
kh s
q f
t)
Source: Company, ICICIdirect.com, Research
Exhibit 2: Sales volumes to remain under pressure
0.2 0.2 0.2 0.10.3
0.5
0.1
0.0
0.3
0.5
0.2
0.2
0.2
0.2
0.3
0.0
0.2
0.5
0.3
1.0
1.3
0.6
0.9
1.7
0.40.1
0.0
1.1
0.0
0.5
1.0
1.5
2.0
FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(m
n s
q f
t)
Goregaon Andheri/Borivali Worli Mulund Pune
Source: Company, ICICIdirect.com, Research
Launches in Borivali, Mulund to impact overall realisation…
ORL’s average realisation has been at a higher level mainly due to 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
22,0
03
20,9
67
21,5
12
16,7
152
4,0
78
21,5
12
16,8
562
4,2
31
19,1
53
21,5
12
16,6
23
24,2
31
19,1
53
21,5
12
16,4
5021,3
05
10,000
15,000
20,000
25,000
Goregaon
(Exquisite)
Goregaon
(Escquire)
Andheri Overall
(|
per s
q f
t)
Q1FY17 Q2FY17 Q3FY17 Q4FY17
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 s
q f
t)
FY15 FY16 FY17E FY18E FY19E
Source: Company, ICICIdirect.com, Research
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 5: Ongoing residential projects operational metrics
Particulars Q4FY17 Q3FY17 Q2FY17 Q1FY17 Q4FY16 Q3FY16
Area Booked (sq ft)
Oberoi Esquire 21106 28016 16920 8008 22610 28,035
Oberoi Exquisite 6890 1820 25102 18220 14430 13,475
Three Sixty West 45427 28686 68288 55320 - 9,562
Priviera - - - - 2350 4,700
Prisma 12364 2602 11395 20188 5204 12,151
Eternia 13140 6240 15380 5010 6680 1,890
Enigma 10107 3070 10720 13477 7476 6,140
Sky City 26362 35780 28514 26974 83257 947,037
Total 135,396 106,214 177,306 147,197 142,007 1,023,977
Sales Value (| crore)
Oberoi Esquire 38.2 53.7 53.5 16.79 46.43 64.3
Oberoi Exquisite 16.2 4.4 40.7 40.09 37.67 31.9
Three Sixty West 187.8 131.1 300.6 237.41 - 40
Priviera - - - - 15.26 33.6
Prisma 22.3 4.5 19.5 34.8 8.76 22.0
Eternia 20.7 9.9 23.7 8.3 10.84 3.2
Enigma 16.9 5.3 17.8 22.58 11.98 9.3
Sky City 43.3 58.6 45.8 46.32 133.61 1567.15
Average Realization for the quarter (|/sq ft)
Oberoi Esquire 18,113 19,153 31,608 20,967 20,535 22,925
Oberoi Exquisite 23,556 24,231 16,230 22,003 26,105 23,644
Three Sixty West 41,341 45,691 44,024 42,916 - 41,832
Priviera** - - - - 64,936 71,532
Prisma 18,012 17,333 17,139 17,238 16,833 18,106
Eternia 15,769 15,817 15,403 16,567 16,228 16,825
Enigma 16,721 17,296 16,576 16,754 16,025 15,098
Sky City 16,421 16,383 16,048 17,172 16,048 16,548
Project Completion (%)
Oberoi Esquire 71.4 63.8 57.3 52.86 43.3 39.5
Oberoi Exquisite 100 100 100 100 100 100.0
Three Sixty West * * * * * *
Priviera 100 100 100 100 100 100.0
Prisma 58.1 55.8 53.9 50.48 44.4 42.3
Eternia * * * * * *
Enigma * * * * * *
Sky City * * * * * *
Inventory as on Date (sq ft)
Oberoi Exquisite 185865 192755 194575 211495 229715 244,145
Three Sixty West 1442777 1488204 1516890 1585178 1640498 1,640,498
Priviera ** 2350 2350 2350 2350 2350 4,700
Prisma 89248 101612 104214 115609 135797 141,001
Eternia# 311880 325020 331260 346640 351650 358,330
Enigma# 455434 465541 468611 479331 492808 201,625
Sky City# 880021 906383 942163 970677 1030295 947037
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,
media reports indicate that 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 | 215.0 crore in
FY19E vs. | 150.0 crore in FY16 driven by 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
0.30.50.5 0.5 0.5 0.5
0.50.5
0.5
0.50.8 0.8 0.9 0.90.9
1.01.2
1.3
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
(m
n s
q f
t)
Commerz I Commerz II Phase I Oberoi Mall
Source: Company, ICICIdirect.com, Research
Exhibit 7: Leasing revenue trend
44 46 48 47 47 46 43 43
456778 79 87
94 94
100103
104122 126
135147 150
173
192
215
0
75
150
225
300
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
(|
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 FY16, it
reported a revenue and EBITDA of | 127.9 crore and | 31.9 crore,
respectively. In Q4FY17, it reported revenue of | 33.9 crore and EBITDA
margin of 38.9% with occupancy rate of 85.7%. Going ahead, we expect
it to post a topline & bottomline of | 146.2 crore and | 43.8 crore,
respectively, in FY19E.
Exhibit 8: Hotel revenue trend
112.7
122.8128.0 126.6
136.0
146.2
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
FY14 FY15 FY16 FY17 FY18E FY19E
(|
crore)
Source: Company, ICICIdirect.com, Research
Exhibit 9: Westin’s operating profit trend
34.2
33.0
41.6
43.6
40.8
43.8
26.9
30.3
34.5
30.0
32.5
30.0
0.0
10.0
20.0
30.0
40.0
50.0
FY14 FY15 FY16 FY17 FY18E FY19E
(|
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 Q4FY17 Q3FY17 Q2FY17 Q1FY17 Q4FY16
Oberoi Mall (Retail Property)
Operating Revenue (| crore) 25.7 25.3 24.7 24.4 22.8
EBITDA margin (%) 93.3 93.9 93.6 92.6 94.1
Occupancy (%) 99.7 99.9 90.9 90.8 99.5
Realisation (|/sqft/month) 155 152 164 162 138
Commerz I (Commercial Space)
Operating Revenue (| crore) 12.0 12.0 11.8 11.9 11.2
EBITDA margin(%) 99.5 98.8 100.3 99.2 99.0
Occupancy (%) 88.5 88.5 88.5 88.5 88.5
Realisation (|/sqft/month) 142 142 140 141 132
Commerz II Phase I (Commercial Space)
Operating Revenue (| crore) 8.2 7.3 4.1 3.5 2.7
EBITDA margin(%) 80.4 68.4 49.6 41.6 -16.3
Occupancy (%) 29.9 29.9 27.1 13.0 13.0
Realisation (|/sqft/month) 126 114 125 122 117
The Westin Mumbai Garden City
(Hospitality)
Operating Revenue (| crore) 33.9 34.6 29.5 28.7 32.6
EBITDA margin(%) 38.9 39.4 28.8 29.2 34.1
Average Room Rate (|) 8532 8889 8226 8166 9041
Occupancy (%) 85.7 81.5 75.0 77.3 77.5
RevPAR (|) 7312 7255 6173 6310 7026
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
Recognised revenues to grow at 59.6% CAGR over FY17-19E…
Revenues de-grew 20.9% YoY to | 1113.7 crore in FY17 in the absence of
any new project hitting revenue recognition threshold and slow sales
momentum. Going forward, we expect revenues to grow robustly at
59.6% CAGR in FY17-19E to | 2836.6 crore with Mulund projects
expected to hit revenue recognition threshold by FY18E end and more
revenues expected to get recognised from completed projects such as
Oberoi Exquisite.
Exhibit 11: Revenues to grow at 59.6% CAGR over FY17-19E…
922.7
1,408.1
1,113.7
2,836.6
2,584.4
500
1000
1500
2000
2500
3000
3500
FY15 FY16 FY17 FY18E FY19E
(|
crore)
CAGR - 59.6%
Source: Company, ICICIdirect.com Research
EBITDA margin to rise marginally…
ORL’s EBITDA margin has dropped significantly in FY16 to 47.7% from
~56.5% in FY15. Going ahead, we expect margins to be in the range of
48-51% given the larger share of residential revenues recognition, which
is typically of lower margins than hospitality and leasing.
Exhibit 12: EBITDA margin trend
55.8
47.4
51.248.9
48.9
35
40
45
50
55
60
FY15 FY16 FY17 FY18E FY19E
(%
)
Source: Company, ICICIdirect.com Research
ORL’s revenues are expected to grow at a CAGR of 59.6%
CAGR during FY17-19E
ICICI Securities Ltd | Retail Equity Research Page 9
Net profit to grow at 54.2% CAGR during FY17-19E…
Overall, we expect ORL’s bottomline will grow at a CAGR of 54.2% during
FY17-19E to | 900.8 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 54.2% CAGR during FY17-19E
317.8 425.9 378.7 900.8851.5
0
100
200
300
400
500
600
700
800
900
1000
FY15 FY16 FY17 FY18E FY19E
(|
crore)
CAGR - 54.2%
Source: Company, ICICIdirect.com Research
Return ratio to bounce back in FY19E…
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 19.3% RoCE and 14.7% RoE in FY19E.
Exhibit 14: Return ratio to bounce back
8.8
6.9
11.0
8.3
18.8 19.3
8.0
6.3
13.714.7
0
4
8
12
16
20
24
FY15 FY16 FY17E FY18E FY19E
(%
)
RoCE RoNW
Source: Company, ICICIdirect.com Research
We expect ORL’s bottomline to grow at a CAGR of 54.2%
during FY17-19E to | 900.8 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 & management bandwidth to execute large projects. Though sales
volumes look strong sequentially, we await a strong pick-up in the sales
volumes, going forward. Further, the recent rally in the stock (up ~21% in
past three months) leaves no room for upside. Hence, we continue to
maintain our HOLD rating on the stock with a revised TP of | 385.
Exhibit 15: Valuation
Location Type Status
Saleable Area ( in mn
sq ft) NAV NAV Multiple Value (| cr) |/share
Goregaon 10.1 5,992.2 5,527.8 163.0
Oberoi Mall Retail Completed 0.6 1,123.5 1.0 1,123.5 33.1
Commerz I Commercial Completed 0.4 479.1 1.0 479.1 14.1
Westin Hotel Completed 0.4 1,076.0 1.0 1,076.0 31.7
Exquisite II Residential Ongoing 1.5 755.8 1.0 755.8 22.3
Commerz II Phase I Commercial Ongoing 0.7 940.6 0.9 799.5 23.6
Exquisite III Residential Planned 1.9 53.8 1.0 53.8 1.6
Commerz II Phase II Commercial Planned 1.7 1,293.4 0.8 970.1 28.6
Oberoi International school Social Infrastructure Ongoing 0.3
Education complex Planned 0.9
Hospital Planned 0.4
Andheri/Khar/Borivali 3.1 3,469.2 3,441.5 101.5
Oberoi Maxima Commercial Ongoing 0.3 209.6 0.9 188.7 5.6
Oberoi Prisma Residential Ongoing 0.7 104.1 1.0 104.1 3.1
Oberoi Splendour IT park Commercial Planned 0.1 68.1 0.9 61.3 1.8
Oberoi Splendour school Social Infrastructre Planned 0.4 14.7 1.0 14.7 0.4
Borivali Residential 4.5 3,072.8 1.0 3,072.8 90.6
Worli 3.4 2,012.2 1,716.8 50.6
Oasis Residential Residential Ongoing 2.3 535.2 1.0 535.2 15.8
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
Mulund 3.2 1,513.9 1,513.9 44.6
Eternia Residential Ongoing 1.6 724.6 1.0 724.6 21.4
Enigma Residential Ongoing 1.6 789.4 1.0 789.4 23.3
Pune 1.3 77.6 71.0 2.1
Sangam city - Residential Residential Planned 0.8 44.5 1.0 44.5 1.3
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) 697.4 1.0 697.4 20.6
Total 21.2 13,762.5 0.9 12,968.3 383
Rounded off Target price 385
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) (%) (%)
FY16 1399.7 53.7 13.0 34.0 30.7 19.9 8.0 11.0
FY17E 1107.6 -20.9 11.5 -11.1 34.5 22.8 6.7 8.6
FY18E 2577.6 132.7 25.9 124.9 15.3 9.7 12.7 17.2
FY19E 2829.2 9.8 27.4 5.8 14.5 8.8 12.7 17.4
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
Recommendation History vs. Consensus
125
250
375
500
May-17Feb-17Dec-16Sep-16Jul-16May-16Feb-16Dec-15Sep-15Jul-15Apr-15
(|
)
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 As per media sources, Oberoi Realty to buy Crompton Greaves’ Worli building spread over ~1 acre for over | 200 crore.
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-16Oberoi 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
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) 30-Sep-16 62.7% 212.9 0.0
2 R S Estate Developers Pvt. Ltd. 30-Sep-16 9.8% 33.3 0.0
3 Aranda Investments (Mauritius) Pte. Ltd. 30-Sep-16 3.7% 12.4 0.0
4 Franklin Advisers, Inc. 28-Feb-17 2.2% 7.4 0.4
5 APG Asset Management 30-Sep-16 1.6% 5.5 0.1
6 OppenheimerFunds, Inc. 30-Sep-16 1.4% 4.8 0.0
7 BlackRock Asset Management North Asia Limited 30-Sep-16 1.3% 4.4 0.5
8 FIL Investment Management (Singapore) Ltd. 31-Jan-17 1.2% 4.1 0.0
9 SSIII Indian Investments Two, Ltd. 30-Sep-16 0.9% 3.0 -6.8
10 The Vanguard Group, Inc. 28-Feb-17 0.7% 2.5 0.0
(in %) Jun-16 Sep-16 Dec-16 Mar-17
Promoter 72.54 72.54 72.53 72.5
FII 22.07 24.23 25.35 25.35
DII 0.68 0.51 0.31 0.57
Others 4.71 2.72 1.81 1.57
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value (m) Shares (m) Investor name Value (m) Shares (m)
TT International 3.9 0.7 J.P. Morgan Asset Management (Hong Kong) Ltd. -3.3 -0.7
Franklin Advisers, Inc. 2.0 0.4 Alpine Woods Capital Investors, LLC -0.6 -0.1
Templeton Investment Counsel, L.L.C. 0.5 0.1 Stewart Investors -0.6 -0.1
Amundi Asset Management 0.4 0.1 Skagen AS -0.5 -0.1
BlackRock Investment Management, LLC 0.3 0.1 UTI International (Singapore) Pvt. Ltd. -0.3 -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) FY16 FY17 FY18E FY19E
Net Sales 1,399.7 1,107.6 2,577.6 2,829.2
Other Operating Income 8.4 6.2 6.8 7.5
Total Operating Income 1,408.1 1,113.7 2,584.4 2,836.6
Growth (%) 52.6 -20.9 132.0 9.8
Operating Costs 629.7 437.1 1,201.3 1,323.8
Employee Expenses 57.6 64.2 67.4 70.7
Other Expenses 53.3 42.3 44.5 46.7
Total Operating Expenditure 740.6 543.6 1,313.1 1,441.2
EBITDA 659.1 564.0 1,264.5 1,388.0
Growth (%) 28.1 -15.5 121.8 9.8
Depreciation 49.0 49.5 51.9 37.8
Interest 0.2 5.6 62.9 62.9
Other Income 36.2 47.3 52.0 57.2
PBT 654.5 562.4 1,201.7 1,344.4
Prior Period Adjustments 0.0 0.0 0.0 0.0
Total Tax 228.6 186.9 396.6 443.7
PAT before profit from associates 425.9 375.6 805.1 900.8
Minoriy Interest 0.0 0.0 0.0 0.0
Profit from associates 0.0 3.1 46.4 76.1
PAT 425.9 378.7 851.5 900.8
EPS (|) 13.0 11.5 25.9 27.4
Source: Company, ICICIdirect.com Research
Cash flow statement (| Crore)
(Year-end March) FY16 FY17E FY18E FY19E
Profit after Tax 425.9 378.7 851.5 900.8
Depreciation 49.0 49.5 51.9 37.8
Interest 71.7 5.6 62.9 62.9
Others -23.8 -47.3 -52.0 -57.2
Net Increase in Current Assets -428.6 53.9 -583.5 -660.5
Net Increase in Current Liabilities 329.1 -49.7 548.8 -94.3
Net cf from operating activities 426.7 390.6 879.6 189.5
(Purchase)/Sale of Fixed Assets -46.5 -25.0 -25.0 -25.0
Others -23.8 -47.3 -52.0 -57.2
Net cf from Investing Activities -243.4 -127.7 27.0 32.2
Inc / (Dec) in Equity Capital 325.8 0.0 0.0 0.0
Inc / (Dec) in Loan Funds -260.0 350.0 0.0 0.0
(Payment) of Dividend & Div. Tax -160.7 -87.1 -127.7 -135.1
Interest paid -86.2 -5.6 -62.9 -62.9
Net cf from Financing Activities -181.2 257.3 -190.7 -198.1
Net Cash flow 2.1 520.3 716.0 23.7
Opening Cash/Cash Equivalent 293.7 320.9 841.1 1,557.1
Closing Cash/ Cash Equivalent 320.9 841.1 1,557.1 1,580.8
Source: Company, ICICIdirect.com Research
Balance sheet (| Crore)
(Year-end March) FY16 FY17E FY18E FY19E
Equity Capital 339.3 339.3 339.3 339.3
Preference Capital 0.0 0.0 0.0 0.0
Reserve and Surplus 4,965.0 5,256.6 5,980.4 6,746.0
Total Shareholders funds 5,304.3 5,595.9 6,319.7 7,085.4
Total Debt 641.5 991.5 991.5 991.5
Deferred Tax Liability 22.9 22.9 22.9 22.9
Total Liabilities 5,968.7 6,610.3 7,334.1 8,099.7
Assets
Gross Block 1,185.5 1,210.5 1,235.5 1,260.5
Less Accumulated Depreciation 208.3 257.8 309.7 347.6
Net Block 977.1 952.6 925.7 912.9
Capital WIP 53.9 53.9 53.9 53.9
Total Fixed Assets 1,031.0 1,006.5 979.7 966.8
Goodwill on consolidation 265.4 265.4 265.4 265.4
Investments 74.4 224.4 224.4 224.4
Inventory 3,930.6 4,206.9 4,494.6 4,937.9
Debtors 117.0 119.3 143.1 171.7
Loans and Advances 1,993.7 1,661.4 1,933.2 2,121.9
Cash 320.9 841.1 1,557.1 1,580.8
Other Current Assets 26.7 26.7 26.7 26.7
Total Current Assets 6,388.9 6,855.3 8,154.8 8,839.0
Creditors 1,786.7 1,737.0 2,285.8 2,191.5
Provisions 4.4 4.4 4.4 4.4
Net Current Assets 4,597.8 5,113.9 5,864.6 6,643.1
Deferred Tax Assets 0.0 0.0 0.0 0.0
Total Assets 5,968.7 6,610.3 7,334.1 8,099.7
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17E FY18E FY19E
Per share data (|)
EPS 13.0 11.5 25.9 27.4
Cash EPS 14.5 13.0 27.5 28.6
BV 161.6 170.5 192.5 215.9
Operating profit per share 20.3 17.4 38.5 42.3
Cash Per Share 9.8 25.6 47.4 48.2
Operating Ratios (%)
EBITDA Margin 47.7 51.5 49.1 49.1
PBT / Net Sales 46.8 50.8 46.6 47.5
PAT Margin 30.4 33.9 31.2 31.8
Inventory days 1,025 1,386 636 637
Debtor days 31 39 20 22
Creditor days 467 574 324 283
Return Ratios (%)
RoE 8.0 6.7 12.7 12.7
RoCE 11.0 8.6 17.2 17.4
RoIC 11.2 9.5 22.1 21.6
Valuation Ratios (x)
P/E 30.7 34.5 15.3 14.5
EV / EBITDA 19.9 22.8 9.7 8.8
EV / Net Sales 9.5 11.7 4.8 4.3
Market Cap / Sales 9.3 11.8 5.1 4.6
Price to Book Value 2.5 2.3 2.1 1.8
Solvency Ratios (x)
Debt / EBITDA 1.0 1.7 0.8 0.7
Debt / Equity 0.1 0.2 0.2 0.1
Current Ratio 3.4 3.5 2.9 3.3
Quick Ratio 1.2 1.0 0.9 1.1
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
ICICIdirect.com coverage universe (Real Estate)
CMP M Cap
(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Oberoi Realty (OBEREA) 398 385 Hold 13,062 13.0 11.5 25.9 30.7 34.5 15.3 19.9 22.8 9.7 2.5 2.3 2.1 8.0 6.7 12.7
Sobha (SOBDEV) 412 415 Hold 4,040 15.6 16.4 20.7 25.5 24.3 19.3 12.0 14.5 11.4 1.5 1.5 1.4 6.0 6.1 7.3
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,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 15
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