The scrip of Oberoi Realty in trade on October 20, 2020 settled higher by 20% on the BSE at Rs. 467.3 shares apiece, recording the sharpest intra-day gains in six months. In fact Nifty Realty index ended the session with sharp gains of close to 4 percent.
Last week, the Mumbai-headquartered real estate firm posted a steady consolidated net profit at Rs 137.74 crore on a year-on-year basis. Income also fell year on year by 36 per cent to Rs. 325 crore for the September ended quarter. However management commentary was positive and stated Oberoi Realty was witnessing consolidation in demand from prospective buyers looking out for quality projects as well as those who pay due heed to financial stability of the real estate developer, especially in these Covid 19 times.
On the sidelines, the real estate firm also said that steps announced by the RBI and state and central governments have also contributed to an upbeat sentiment. The reduction of stamp duty on property purchase by Maharashtra government was to revive demand in the sector to pre-Covid levels.
HDFC Securities maintains ' Buy' on Oberoi Realty:
With positive pre-sales volume which was restored to 93% of Q2FY20 levels and booking value which came in higher than Q2FY20 figures at Rs. 3.3 billion due to better realizations for the just ended September quarter, brokerage firm anticipates the momentum to persist for Oberoi Realty. This is largely owing to low interest rate, stamp duty cut, market consolidation and strong branding.
Launches in the residential segment in Borivali, Goregaon and Thane are on track. Also, the company is considering to come up with a platform for reaping value from commercial office space. The brokerage has modified its FY21/22/23 estimates for the realty major by +2/-4/-3% and maintains BUY on Oberoi Realty with a revised target price of Rs. 497.
Jefferies report suggested that Oberoi Realty is considering launch of three projects - Sky City Phase 2, Exquisite Phase 3 and Thane in the second half of FY21 which shall push sales higher in FY21 in comparison to FY20. For the pending launches, there is anticipated a decline in sales of 15 per cent year-on-year. Further, the company when talking of malls is offering an extensive 50% discount on base rentals for FY21 together with 1 year lease extension, a move that could bring in Rs. 145 million from mall revenues. "We further expect cashflows to return to normal levels and construction pace to pick up in H2FY21," the report added.
Jefferies also said the company is mulling setting up a lease asset platform with a PE player. The company may pare a minority holding in the lease asset portfolio for establishing clear valuations, accelerate lease asset build-out and allow eventual REIT of the assets.
Thus the firm increased the price target for Oberoi Realty to Rs. 483 and upside scenario target price to Rs. 574 if the above listed triggers are realized successfully.