Buy Oberoi Realty, target Rs 525: HDFC Securities

HDFC Securities has a buy call on Oberoi Realty (ORL) with a target price of Rs 525.

The current market price of Oberoi Realty is Rs 463.70.

Time period given by the brokerage is one year when Oberoi Realty price can reach the defined target.


Investment rationale by the brokerage-
Coming off a fairly impressive 1HFY19, ORL posted disappointing pre-sales in Goregaon and Worli.

Despite Sky City continuing its strong >50 units/qtr performance, pre-sales (including JV) dropped to 0.14mn sqft in 3QFY19 (vs 0.24mn sqft QoQ).

Revenue/EBIDTA/PAT came 21/38/11 per cent below est. Real estate sector is facing multiple headwinds with (1) Muted demand in the luxury segment due to high prices, (2) Tightening NBFC liquidity posing completion challenges and (3) RERA hitting mid-tier developers which are now staring at potential defaults over next 6M.

Inventory liquidation will lead to suppressed prices and impact sector profitability. Organized players universe is increasing as stressed assets are up for sale/bailout.

This shall level ORL brand premium over time.

High Capex intensity and lower sales velocity pose near term challenges.

A strong balance sheet, a robust execution track record and a mix of Residential/Annuity assets give us comfort.

Maintain 'Buy' with a reduced target price of Rs 525 per share.