After a strong H1, pre-sales declined sharply in Q3 to `2.4 billion mainly on no sales at Worli project (5/4 units sold in Q2/Q1) and slower traction at Goregaon project (sold 13 units vs 32/57 units in Q2/Q1).
The management said it will continue to evaluate traction at the Goregaon project and alter its activation strategy if need be. Also, we do not expect a pick-up at the Worli project over the next two-three quarters as it is expected to receive the occupancy certificate (OC) in CY19, which would delay purchase decision of prospects (GST will be exempt). However, new launches (Goregaon, Thane) in mid-FY20 will help revive volumes.

While the near-term outlook is muted, we like Oberoi from a long-term perspective due to its strong balance sheet (net D/E of 0.2x) and brand well-placed to capitalise on industry consolidation. Maintain ‘buy’.

Revenue/net profit lower at `5.3 billion/`1.4 billion (vs `5.9 billion/`2.1 billion in Q2). Ebitda margin declined to 36% (50% in Q2) on change in product mix (significantly higher contribution from Borivali).

Annuity income grew strong 11% quarter on quarter or 27% year-on-year primarily driven by an increase in occupancy and average rentals at Commerz II. Further, occupancy at Commerz II is expected to reach
100% by March 2019 (from 64% in Q3) as it is fully leased.

Sales traction remained steady with sales of 51 units for `1.2 billion (vs 57 units for `1.3 billion in Q2) mainly led by the launch of a new tower at the project. The company undertook a price hike of `500 psf in Q3 in the new tower, which was absorbed by the market. Oberoi Mall reported strong revenue/Ebitda of `3.9 billion/3.7 billion in Q3 (up 40% y-o-y) led by strong rental escalations during the quarter. Average monthly rentals now stand at `242 psf pm (vs `170 in Q3FY18).

Commerz II reported continued growth in revenue and margin as occupancy levels improved to 64%
(vs 45% in Q3FY18). Average rentals improved sharply to `141 psf per month (vs `117 psf per month in Q3FY18). Company expects Commerz II to achieve 100% occupancy by March 2019 as it is fully leased out.