ICICI Securities: Upgrade Oberoi Realty to ‘buy’, target price Rs 577

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Published: October 11, 2019 12:40:04 AM

After a lull in launch activity in H1FY20, Oberoi Realty (OBER) has a number of launches lined up to coincide with the festive season in Q3FY20.

OBER has recently launched its Maxima tower at the JVLR, Andheri project (180 units priced between Rs 3.5-4 crore) in the first week of October 2019 and is on track to launch its Goregaon Phase 3 and Thane projects in Q3FY20. OBER has recently launched its Maxima tower at the JVLR, Andheri project (180 units priced between Rs 3.5-4 crore) in the first week of October 2019 (Source: Oberoi Realty)

After a lull in launch activity in H1FY20, Oberoi Realty (OBER) has a number of launches lined up to coincide with the festive season in Q3FY20. OBER has recently launched its Maxima tower at the JVLR, Andheri project (180 units priced between Rs 3.5-4 crore) in the first week of October 2019 and is on track to launch its Goregaon Phase 3 and Thane projects in Q3FY20.

Although the overall market sentiment for residential property in Mumbai remains weak, launches by established developers with a strong execution track record continue to see buyer interest and remain the exception rather than the rule. We retain our target price of Rs 577/share and upgrade our rating to ‘buy’ from ‘add’ post 15% correction in the stock price over the last three months.

Maxima tower launched at JVLR, Andheri project: OBER has recently launched its Maxima residential tower at its JVLR, Andheri project (same project where Splendour and Splendour Grande is located) in the first week of October 2019. The tower has ~180 units of which ~150 units have been launched for sale and consists of large 3BHK units having carpet area of 1,300-1,350 sq ft with a base unit price of Rs 3.5 crore. At an overall level, OBER can generate over Rs 700 crore of sales bookings from this project.

Goregaon and Thane projects to provide further impetus: OBER has timed its launch plans for Goregaon Phase 3 and Thane projects in Q3Y20 (Goregaon launch may coincide with Diwali by the end of October 2019 with Thane launch being expected later during the quarter). These launches, along with the completion of the Worli project in Q3FY20, will enable OBER to shore up volumes in H2FY20E.

Rental asset focus to benefit OBER in the medium term: OBER’s upcoming projects spread across 15msf will consist of only 50% residential component with office (25%) and hospitality (15%) set to become a larger portion of OBER’s cashflows over the medium term. This would reduce OBER’s dependence on the residential segment and build up a strong rental portfolio in next 4-5 years.

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