After completion of show flat at its Worli project, Oberoi Realty (ORL) has seen strong traction with 8 units sold in Q2 (vs. 6 units in Q1) for `3 billion (average realization of `44,000 psf). ORL also leased out 0.1 msf in its Commerz II project to Teva Pharma at `110 psf p.m. ORL has incurred significant amount of cost in its Worli (`15bn) and Commerz II (`4bn) projects, which had not seen any cash inflows for the past few years. Pick-up in traction at both these projects improves visibility of earnings and cash flows.
We lower our monetisation timeline for Worli project and change valuation methodology for Commerz II (based on cap rate vs. Book value earlier). Our revised TP stands at `382 (vs.`350 earlier). Presales at other projects were tepid especially in its completed project Exquisite, where it sold only 8 units (vs. 9 units in Q1). Collections improved to ~`3 bn (vs. `2.4 billion in Q1). Operating cash flow too improved q-o-q but stood low at `79 million (vs. negative `0.4 bn in Q1). While presales at Mulund project improved driven by the show apartment which was opened at the end of Q1, the Borivali project saw steady presales (22 units sold vs. 20 units in Q1). The show apartment at Borivali was opened towards the end of Q2 and may lead to improved conversion in Q3. ORL reported revenue of `2.5 billion in Q2 (vs. `3.3 billion in Q1) mainly due to lower sales traction in its revenue-contributing projects such as Exquisite and Esquire and slow pace of execution due to monsoon.