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18
Quality Land Bank – “provides strong revenue visibility” Oberoi Realty, a renowned Mumbai based real estate player focused on premium developments has total land bank of 21.5 MSF. Approximately 93% of the developable area (19.8MSF) is located in some of the prime locations of Mumbai like – Worli, Andheri and Goregaon. Out of this total developable area, 28% is of Investment property (Lease Model) and 72% is Development property. The company is currently working on 9.88 MSF of area for immediate development which would likely be completed in the next 4-5 years, enabling the revenue to grow at a CAGR of 43% till FY13. Robust Cash flow – backed by Annuity stream The company follows a lease model for a portion of its commercial and retail properties which are classified as Investment properties by the company to generate stable stream of cash flow to better manage cyclical risks. Oberoi realty has off-lately completed one Commercial, Retail and Hotel project having an occupancy level of 77%, 91% and 62% respectively as of 9MFY11. These three projects collectively have contributed 17% of revenue to the company as of 9MFY11. Further the company has plans to develop 5.5MSF of area under lease model of which 2.6MSF is for immediate development. Keeping in mind the ongoing projects its revenue from the rental and hospitality projects is likely to grow at a CAGR of 41% for the next 3 years to ~Rs.2349Mn. Commendable Financials Oberoi Realty has a strong and experienced management that has enabled the company to adapt to the changing market conditions in a focused and constructive manner. The company has delivered a Revenue and PAT CAGR of 76% and 90.3% respectively in the last four years with strong profitability margins of 59.6% and 58.4% at operating and net level respectively. The company has strong balance sheet with zero debt and a cash surplus of Rs.15777 mn (cash and cash equivalents) 19% of MCAP. OUTLOOK & VALUATION Oberoi Realty a well known brand in the Mumbai based Real Estate market has delivered a Revenue and PAT CAGR of 76% and 90.3% respectively in the last four years. It has a huge land bank of 21.5 MSF which would enable its revenue to grow at a CAGR of 43% for the next three years. It maintains a fine balance of assets for - sale and lease to enable it to achieve steady and visible cash flow and better manage cyclical risks. As of 9MFY11 the company’s lease and hospitality projects have contributed 17% to its revenue. Its revenue from the rental and hospitality projects is likely to grow at a CAGR of 41% for the next 3 years to ~Rs.2349 Mn by FY13. It has a strong balance sheet with zero debt and cash surplus of Rs.15777 mn. The company also has superior return ratios as compared to the peer group companies – ROE of 28.1% and ROCE of 27.6% as of FY10. Thus considering the growth potential, quality land bank, pricing power amidst premium brands and strong balance sheet we recommend an “ACCUMULATE” on the stock with a NAV based target price of Rs.298. OBEROI REALTY LTD. Please refer to important disclosures at the end of the report For private Circulation Only. April 18, 2011 ACCUMULATE MEDIUM RISK PRICE Rs.251 TARGET Rs.298 Real Estate SHARE HOLDING (%) Promoters 78.5 FII 18.9 FI / MF 1.0 Body Corporates 0.5 Public & Others 1.1 STOCK DATA Bloomberg Code Reuters Code OBER IN OEBO.BO NSE Symbol BSE Code OBEROIRLTY 533273 Market Capitalization* Rs.82386.2 mn US$ 1868.2 mn Shares Outstanding* 328.2mn 52 Weeks (H/L) Rs. 307 /210 Avg. Daily Volume (6m) 3063.91Shares Price Performance (%) 1M 3M 6M 5 1 (11) *On fully diluted equity shares Please refer to important disclosures at the end of the report For private Circulation Only. Sushil Financial Services Private Limited Member : BSEL, SEBI Regn.No. INB/F010982338 | NSEIL, SEBI Regn.No.INB/F230607435. Office : 12, Homji Street, Fort, Mumbai 400 001. Phone: +91 22 40936000 Fax: +91 22 22665758 Email : [email protected] KEY FINANCIALS Y/E Mar. Revenue (Rs mn) APAT (Rs mn) AEPS (Rs) AEPS (% Ch.) P/E (x) ROCE (%) ROE (%) P/BV (x) FY10 7836.5 4576.2 15.6 - 16.0 27.6 28.1 4.0 FY11E 10923.5 5487.1 16.7 6.9% 15.0 24.1 21.1 2.4 FY12E 15433.5 6795.2 20.7 23.8% 12.1 23.8 18.5 2.1 ANALYST Ishpreet Batra | +91 22 4093 5091 [email protected] SALES: Devang Shah | +91 22 4093 6060/61 [email protected] Nishit Shah | +91 22 4093 5074 [email protected] Initiating Coverage STRENGTH : Huge Project Pipeline, Strong Brand Image, Quality Land Bank, Focus on Execution, Consistent Cash-flows from Annuity Business, Strong Balance Sheet, Robust Return Ratios WEAKNESS : Exposed to one main city - Mumbai. OPPORTUNITIES: Huge demand for residential housing in India. THREAT : Rise in Interest Rate, Slowdown in Real Estate.

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Quality Land Bank – “provides strong revenue visibility” Oberoi Realty, a renowned Mumbai based real estate player focused on premium developments has total land bank of 21.5 MSF. Approximately 93% of the developable area (19.8MSF) is located in some of the prime locations of Mumbai like – Worli, Andheri and Goregaon. Out of this total developable area, 28% is of Investment property (Lease Model) and 72% is Development property. The company is currently working on 9.88 MSF of area for immediate development which would likely be completed in the next 4-5 years, enabling the revenue to grow at a CAGR of 43% till FY13.

Robust Cash flow – backed by Annuity stream The company follows a lease model for a portion of its commercial and retail properties which are classified as Investment properties by the company to generate stable stream of cash flow to better manage cyclical risks. Oberoi realty has off-lately completed one Commercial, Retail and Hotel project having an occupancy level of 77%, 91% and 62% respectively as of 9MFY11. These three projects collectively have contributed 17% of revenue to the company as of 9MFY11. Further the company has plans to develop 5.5MSF of area under lease model of which 2.6MSF is for immediate development. Keeping in mind the ongoing projects its revenue from the rental and hospitality projects is likely to grow at a CAGR of 41% for the next 3 years to ~Rs.2349Mn.

Commendable Financials Oberoi Realty has a strong and experienced management that has enabled the company to adapt to the changing market conditions in a focused and constructive manner. The company has delivered a Revenue and PAT CAGR of 76% and 90.3% respectively in the last four years with strong profitability margins of 59.6% and 58.4% at operating and net level respectively. The company has strong balance sheet with zero debt and a cash surplus of Rs.15777 mn (cash and cash equivalents) 19% of MCAP.

OUTLOOK & VALUATION Oberoi Realty a well known brand in the Mumbai based Real Estate market has delivered a Revenue and PAT CAGR of 76% and 90.3% respectively in the last four years. It has a huge land bank of 21.5 MSF which would enable its revenue to grow at a CAGR of 43% for the next three years. It maintains a fine balance of assets for - sale and lease to enable it to achieve steady and visible cash flow and better manage cyclical risks. As of 9MFY11 the company’s lease and hospitality projects have contributed 17% to its revenue. Its revenue from the rental and hospitality projects is likely to grow at a CAGR of 41% for the next 3 years to ~Rs.2349 Mn by FY13. It has a strong balance sheet with zero debt and cash surplus of Rs.15777 mn. The company also has superior return ratios as compared to the peer group companies – ROE of 28.1% and ROCE of 27.6% as of FY10. Thus considering the growth potential, quality land bank, pricing power amidst premium brands and strong balance sheet we recommend an “ACCUMULATE” on the stock with a NAV based target price of Rs.298.

OBEROI REALTY LTD.

Please refer to important disclosures at the end of the report For private Circulation Only.

April 18, 2011 ACCUMULATE MEDIUM RISK PRICE Rs.251 TARGET Rs.298

Real Estate

SHARE HOLDING (%)

Promoters 78.5

FII 18.9

FI / MF 1.0

Body Corporates 0.5

Public & Others 1.1

STOCK DATA

Bloomberg Code Reuters Code

OBER IN OEBO.BO

NSE Symbol BSE Code

OBEROIRLTY 533273

Market Capitalization*

Rs.82386.2 mn US$ 1868.2 mn

Shares Outstanding*

328.2mn

52 Weeks (H/L) Rs. 307 /210

Avg. Daily Volume (6m)

3063.91Shares

Price Performance (%)

1M 3M 6M

5 1 (11)

*On fully diluted equity shares

Please refer to important disclosures at the end of the report For private Circulation Only.

Sushil Financial Services Private Limited Member : BSEL, SEBI Regn.No. INB/F010982338 | NSEIL, SEBI Regn.No.INB/F230607435. Office : 12, Homji Street, Fort, Mumbai 400 001. Phone: +91 22 40936000 Fax: +91 22 22665758 Email : [email protected]

KEY FINANCIALS

Y/E Mar.

Revenue (Rs mn)

APAT (Rs mn)

AEPS (Rs)

AEPS (% Ch.)

P/E (x)

ROCE (%)

ROE (%)

P/BV (x)

FY10 7836.5 4576.2 15.6 - 16.0 27.6 28.1 4.0 FY11E 10923.5 5487.1 16.7 6.9% 15.0 24.1 21.1 2.4 FY12E 15433.5 6795.2 20.7 23.8% 12.1 23.8 18.5 2.1

ANALYST Ishpreet Batra | +91 22 4093 5091 [email protected]

SALES: Devang Shah | +91 22 4093 6060/61

[email protected]

Nishit Shah | +91 22 4093 5074 [email protected]

Initiating Coverage

STRENGTH : Huge Project Pipeline, Strong Brand Image, Quality Land Bank, Focus on Execution, Consistent Cash-flows from Annuity Business, Strong Balance Sheet, Robust

Return Ratios WEAKNESS : Exposed to one main city - Mumbai. OPPORTUNITIES: Huge

demand for residential housing in India. THREAT : Rise in Interest Rate, Slowdown in Real

Estate.

April 18, 2011

2

Oberoi Realty Ltd.

COMPANY OVERVIEW

Oberoi Realty since inception has evolved into a real estate developer with focus on premium developments in Mumbai. The Promoter Mr.Vikas Oberoi and group have completed 34 projects in the past covering ~5MSF of saleable area across the Mumbai city. On the back of quality construction, timely execution and strong brand image the company commands a premium for its projects. It has a diversified portfolio of Completed, Ongoing and Planned projects in Multi-segment developments. It covers key segments of the real estate market like(i) Residential (ii) Commercial (iii)Retail (iv) Hospitality and (v) Social Infrastructure.

Source: Company

The Company follows a robust business model which would help the company face the vagaries of the real estate market. The company follows an outright sales model for its residential projects, a lease model for its commercial, retail and social infrastructure projects. The Company was incorporated as Kingston Properties Private Limited on May, 1998. The name of the Company was changed to Oberoi Realty Private Limited on October, 2009, and was further changed to Oberoi Realty Limited on December, 2009. The Promoter and Promoter Group have been developing real estate since 1983, initially as a proprietorship firm and, since 1993, through various project-specific entities. The following diagram illustrates the corporate structure of Oberoi Realty:

Oberoi Realty

Residential

Sale

Commercial

Sale/Lease

Retail

Sale/Lease

Hospitality

Owned

Social Infrastructure

Lease

April 18, 2011

3

Oberoi Realty Ltd.

Source: Company

The following table identifies which of the development sites are being or will be developed by each ofthe entities or joint ventures as identified in the above diagram: Source: Company

Outsourcing - The company has been following an outsourcing model for construction since 2003 which gives it scalability and emphasizes contemporary design and quality construction. It has strong and long-standing relationships with external service providers such as architects, landscape planners and contractors. This allows the company to work with several international architects, such as SCDA Architects, Singapore and Bentel and Associates, South Africa, and with domestic contractors such as Larsen &Toubro Limited that provides it with innovative design capabilities and quality construction. The outsourcing model enables it to leverage the expertise of its service providers and also enables its management to focus on other aspects of the business.

Oberoi Realty Ltd.

Oberoi Const.Pvt.

Ltd

Siddhivinayak Realities Pvt. Ltd

Perspective Realty Pvt. Ltd.

Oberoi Mall Pvt.

Ltd.

Kingston Property Services Pvt. Ltd.

Sangam City Pvt.

Ltd.

Kingston Hosp. & Dev. Pvt

Ltd

Expression Pvt. Ltd

Triumph Pvt Ltd.

Entity/ Joint Venture Development Project

Oberoi Realty Oberoi Garden City, Goregaon, Mumbai

Oberoi Mall Pvt. Ltd. Oberoi Mall, Oberoi Garden City, Goregaon, Mumbai

Oberoi Constructions Pvt. Ltd. Oberoi Splendor, Andheri- East, Mumbai

Oberoi Exotica, Mulund-West, Mumbai

Oasis Realty Oasis Realty, Worli, Mubai

Siddhivinayak Realties Pvt. Ltd.

Juhu Hotel, Juhu, Mumbai

Sangam City Township Pvt. Ltd.

Sangam City, Sangamwadi, Pune

(100%) (100%) (100%) (31.7%) (100%) (100%) (100%)

(50%)

(100%)

April 18, 2011

4

Oberoi Realty Ltd.

INVESTMENT ARGUMENTS

Quality Land Bank – “provides strong revenue visibility” Oberoi Realty, a renowned Mumbai based real estate player focused on premium developments has total land bank of 21.5 MSF. The company continues to have residential development as its main segment; however it has a presence in all the verticals of real estate development as shown in the diagram below –

Source: Company

The company has 12.2MSF of area under development for Residential segment with 5.9 MSF of area for immediate development. Approximately 93% of the developable area (19.8MSF) is located in some of the prime locations of Mumbai like – Worli, Andheri, Goregaon and Mulund.

Source: Company

In Mumbai the Goregaon project accounts for ~47% of the land, followed by 17% in Andheri, 17% in Mulund, 12% in Worli and 7% in Juhu.

Residential = 12.2MSF

Ongoing - 5.9MSF

Planned - 6.4MSF

Commercial = 4.4MSF

Completed- 0.4 MSF

Ongoing - 3.7 MSF

Planned - 0.4 MSF

Retail = 1MSF

Completed- 0.6 MSF

Ongoing - 0.1 MSF

Planned - 0.3 MSF

Hotel = 1.9MSF

Completed- 0.4 MSF

Ongoing - 0.2 MSF

Planned - 1.3 MSF

Social Infrastructure

= 2 MSF

Completed- 0.3 MSF

Ongoing - NA

Planned - 1.7 MSF

Mumbai

93%

Pune7%

City-wise break-up

Andh

eri-(E)17%

Goregaon-(E)

47%

Worli12%

Mulund-

(W)17%

Juhu

7%

Area-wise break-up in Mumbai

Development Across Verticals

April 18, 2011

5

Oberoi Realty Ltd.

On the back of strong management experience and vision, the average land cost for the company for its three major Mumbai projects accounting for 81% (Goregaon 47%, Andheri 17%, Mulund 17%) of the total land in Mumbai comes to ~Rs.247/SF.

Project Seller Area (Acres)

Area (MSF)

Consideration (Rs.Mn)

Cost/SF

Oberoi Garden City - Goregaon

Novartis 83.88 11.17 1067.76 95.56

Oberoi Splendor - Andheri

Madhu Fantasy 24.47 3.13 1060.00 338.77

Oberoi Exotica - Mulund

GlaxoSmithKline 18.80 3.20 2210.00 690.63

Source: Company

The company is currently working on 9.88 MSF of area for immediate development which would likely be completed in the next 4-5 years.

Project Location Project Type

Area (MSF)

Revenue Estimate* (Rs.Mn)

Revenue Recognized ***(Rs.Mn)

Development Property

Oberoi Splendor Andheri-(E) Residential 1.28 14582.3 11852.7 Oberoi Splendor Grande

Andheri-(E) Residential 0.28 3605.8 -

Oberoi Exquisite I Goregaon-(E)

Residential 1.45 16652.5 2154.5

Oberoi Exquisite II Goregaon-(E)

Residential 1.33 15771.9 -

Oasis Residential Worli Residential 1.54 17807.1 - Oberoi Splendor Prisma

Andheri-(E) Commercial 0.71 8183.1 -

Oberoi Splendor Maxima

Andheri-(E) Commercial 0.32 3666.2 -

Oasis Commercial Worli Commercial 0.24 2543.0 - Oasis Retail Worli Retail 0.12 1271.5 - Sub-Total 7.28 84083.4 14007.2 Investment Property **

Commerz II Phase I Goregaon-(E)

Commercial 0.73

Commerz II Phase II Goregaon-(E)

Commercial 1.66

Oasis Hotel Worli Hospitality 0.22 Sub-Total 2.60 Total 9.88

Source: Company *Revenue Estimates based on our sales realization assumptions ** Investment property to generate rental income ***Revenue Recognized till 9MFY11

April 18, 2011

6

Oberoi Realty Ltd.

The company is thus likely to witness a revenue inflow of Rs.84083.4Mn in the next 4-5 years from its development property of which the company has already recognized Rs.14007.2 Mn till 9MFY11. We therefore believe that the revenue is likely to grow at a CAGR of 43% for the next three years to Rs.22819.3Mn.

Source: Sushil Finance

Robust Cash flow – backed by Annuity stream

The company follows a lease model for a portion of its commercial and retail properties which are classified as Investment properties by the company to generate stable stream of cash flow and to better manage the cyclical risks. Out of the total developable area of 19.85MSF, 28% is of Investment property and 72% is Development property.

Source: Company

The company is to develop 5.6 MSF of investment property, of which 53% is for immediate development and 47% of it is still under the planning stage.

84%

39% 41%

48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

-

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

FY10 FY11E FY12E FY13E

Revenue Growth

Revenue (R.H.S) (Rs.Mn) YoY (L.H.S) (%)

28%72%

Developable Area Break-up

Investment Property Development Property

47%

53%

Investment Property Break-up

Ongoing Planned

April 18, 2011

7

Oberoi Realty Ltd.

Source: Company

Oberoi realty has off-lately completed one Commercial, Retail and Hotel project as shown in the chart above. These three projects collectively have contributed 17% of revenue to the company as of 9MFY11. As these projects are still not fully occupied the company is likely to see further scalability in revenue from these projects. Further the company has plans to develop 5.6 MSF of area under lease model of which 2.6MSF is for immediate development.

Source: Company, Sushil Finance

Completed Area - 1.7MSF

• Commerz I (Goregaon) Area - 423,786 SF Occupancy - 77% Rate - Rs.135/SF/PM

•Oberoi Mall (Goregaon) Area - 552,893 SF Occupancy - 91.5% Rate- Rs.121/SF/PM

•Westin Hotel (Goregaon) Area - 381,820 SF Occupancy - 62% ARR- Rs.7719

•Oberoi International School (Goregaon) - 305,309 SF

Ongoing - 2.6MSF

• Commerz II Phase 1 (Goregaon) Area - 725,769 SF Commencement- FY13

•Commerz II Phase II (Goregaon) Area - 1,661,650 SF Commencement - FY14

•Oasis Hotel (Worli) Area - 215,280 SF Commencement - FY15

Planned - 2.96MSF

•Juhu Hotel (Juhu) Area - 1,289,787 SF

•Oberoi Education Complex (Goregaon) Area - 866,130 SF

•Oberoi Hospital (Goregaon) Area - 375,481 SF

• Oberoi Splendor School (Andheri) Area - 430,990 SF

737.4 833.5

1577.8

1800.7

2349.2

0%

20%

40%

60%

80%

100%

0.0

500.0

1000.0

1500.0

2000.0

2500.0

FY09 FY10 FY11E FY12E FY13E

Revenue From Investment Property (Rs.Mn)

Revenue (Rs.Mn) (L.H.S) YoY (%) (R.H.S)

42%

36%

22%

Break-up of Revenue from Investment Property (9MFY11)

Hotel Retail Commercial

Investment Property –

7.2MSF

April 18, 2011

8

Oberoi Realty Ltd.

Thus revenue from the investment properties (including completed and ongoing projects) is likely to grow at a CAGR of 41% till FY13 to Rs.2349.2Mn. The three completed investment projects - Oberoi Mall, Westin Hotel and Commerz 1 contribute ~18% to the NAV of the Company.

Source: Sushil Finance Approximately 56% of the NAV comes from the ongoing projects which are likely to be completed in the next 4-5 yrs, followed by 26% from Planned projects. Thus considering the huge project pipeline, Revenue CAGR of 43%, sustainable cash flow from investment properties the company is likely to see robust cash-flow from operations as shown in the chart below:

Source: Sushil Finance Thus the company seems to be in a “Sweet Spot”, as it is well placed to take the advantage of fall and rise in the property prices. The company has enough cash to bank upon a good land deal if the property prices fall, also, if the prices increase it has enough inventory to take advantage by selling at a higher rate.

56%

18%

26%

NAV Break-up

Ongoing Completed Planned

4,757.1

3,833.2

4,649.0

5,238.0

-

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

FY10 FY11E FY12E FY13E

Cash Flow from Operations (Rs.Mn)

April 18, 2011

9

Oberoi Realty Ltd.

Commendable Financials

Oberoi Realty has a strong and experienced management that has enabled the company to adapt to the changing market conditions in a focused and constructive manner. The company has delivered a Revenue and PAT CAGR of 76% and 90.3% respectively in the last four years with strong profitability margins (FY10) of 59.6% and 58.4% at operating and net level respectively.

Source: Company

The management’s ability to manage its working capital efficiently and to acquire land at lower cost has resulted into higher return ratios. As compared to the peer group companies in the real estate market, Oberoi Realty has superior return ratios.

Source: Sushil Finance The company has strong balance sheet with zero debt and a cash surplus of Rs.15777 mn (cash and cash equivalents) 19% of MCAP.

808.8

2,351.8

5,111.9

4,254.1

7,836.5

-

2,000

4,000

6,000

8,000

FY06 FY07 FY08 FY09 FY10

Revenue (Rs.Mn)

349.2

791.6

2,951.6

2,523.3

4,576.2

-

1,000

2,000

3,000

4,000

5,000

FY06 FY07 FY08 FY09 FY10

PAT (Rs.Mn)

FY07 FY08 FY09 FY10 FY11E FY12E FY13E

ROE 17.4 28.9 18.9 28.1 21.1 18.5 22.2

ROCE 10.0 19.6 17.0 27.6 24.1 23.8 28.5

0.0

6.0

12.0

18.0

24.0

30.0

Healthy Return Ratios (%)

ROE ROCE

April 18, 2011

10

Oberoi Realty Ltd.

RISK & CONCERNS Regional Centric Oberoi Realty is mainly exposed to Mumbai region. It has around 18.5MSF of land in Mumbai. Thus, any significant change in the property prices or government policies in this region is likely to impact the execution of the Company.

Cyclical Industry The realty market has its fortunes largely linked to the overall development in the economy. In 2007 the property prices had reached their peak levels, prompting many builders to undertake further projects resulting into a huge supply. This was unfortunately immediately followed by a severe slump in the economy, which took a toll on the consumer demand, resulting into an oversupply and eventually a steep fall in the real estate prices. In such scenario Companies having higher debt are the most vulnerable, owing to the high interest cost. We therefore prefer Oberoi Realty, which has zero debt and cash surplus of Rs.15777 mn.

Land Title Land titles in India are still very unclear and it can be very difficult to ascertain the legal ownership of land. This is specifically true in case of agricultural land, which has passed in current hands by way of inheritance through generations of large families. However Oberoi Realty has acquired land parcels from some of the well known MNC’s thus reducing the risk of land title.

Rise in Interest Rates Sharp rise in inflation has resulted into steady rise in Interest rates, increasing the cost of borrowings. Interest rates are directly linked to the capacity of the buyers to pay and purchase thus impacting the demand.

Execution Risk Unexpected delays in the execution of projects can strain the Company’s cash flow and affect its growth. This can also result in a liquidity risk- a lack of available funds to meet the Company’s working capital needs.

April 18, 2011

11

Oberoi Realty Ltd.

84%

14%2%

Development Property Break-up

Residential Commercial Retail

41%

7%2%

28%

6%

16%

Segment-Wise NAV

Dev.Property RetailHotel CommercialSocial Proj./Others Cash

OUTLOOK & VALUATION Oberoi Realty a well known brand in the Mumbai Real Estate market has delivered a Revenue and PAT CAGR of 76% and 90.3% respectively in the last four years. It has a huge land bank of 21.5 MSF which would enable its revenue to grow at a CAGR of 43% for the next three years. It maintains a fine balance of assets for - sale and lease to enable it to achieve steady and visible cash flow and better manage cyclical risks. As of 9MFY11 the company’s lease and hospitality projects have contributed 17% to its revenue. Its revenue from the rental and hospitality projects is likely to grow at a CAGR of 41% for the next 3 years to ~Rs.2349 Mn by FY13. It has a strong balance sheet with zero debt and cash surplus of Rs.15777 mn. The company also has superior return ratios as compared to the peer group companies – ROE of 28.1% and ROCE of 27.6% as of FY10. Thus considering the growth potential, quality land bank, pricing power amidst premium brands and strong balance sheet we recommend an “ACCUMULATE” on the stock with a NAV based target price of Rs.298.

We have valued the assets of the company through sum of the parts methodology. We have valued the Development Property through NPV and Retail, Hotel, Commercial and social projects which are leased through DCF methodology.

Source: Sushil Finance

Valuation

Segment Valuation Methodology

NPV (Rs. Mn)

Dev. Property NPV 39896.7

Retail DCF 7180.8

Hotel DCF 2012.5

Commercial DCF 27723.1

Social Proj./Others DCF 5330.4

Gross Asset Value 82143.4

Less: Debt 0.0

Add: Cash 15777.2

Net Asset Value 97920.6

No.Of Shares 328.2

NAV/Share 298.3

April 18, 2011

12

Oberoi Realty Ltd.

Assumptions:

Development Property –

Cost Of Construction Increase by 5% p.a. phase-wise

Sales Realization Increase by 3% p.a. phase-wise

SGA Exp at 2.5% of the revenue

WACC @ 13.3%

Retail / Commercial-

DCF Methodology

Cap rate @ 11%

Terminal growth rate @ 4%

Lease agreement - 15% hike in rentals in every 3 years

Vacancy factor of 5% after four years of operations.

Hotel

DCF Methodology

Cap rate @ 11%

Terminal growth rate @ 2%

Peak Occupancy taken as 75%

Sensitivity Analysis

Bear Case Base Case Bullcase

Realization Chg (%) -10% - 10% NAV 270 298.3 329.8 Chg. in NAV (%) -9.5% 10.6%

Peer Group Analysis

Peers OPM (%) NPM (%) ROE (%) P/E (x)

Anant Raj 54.7 38.1 4.3 18.1 Sobha Developers 23.2 12.8 10.3 15.1 HDIL 58.2 45.9 10.9 8.2 Indiabulls Real Estate 25.2 18.1 2.0 29.5 Godrej Properties 18.5 13.2 33.7 48.3 Oberoi Realty 60.0 50.2 21.1 15.0 Avg. 40.0 29.7 13.7 22.4

Source: Sushil Finance, Bloomberg

*Based on FY11E numbers

April 18, 2011

13

Oberoi Realty Ltd.

ors

PROFIT & LOSS STATEMENT (Rs.mn)

Y/E March FY10 FY11E FY12E

Total Sales 7836.5 10923.5 15433.5

COGS 3026.0 4127.5 5995.7

EBITDA 4672.1 6555.8 9098.3

Depreciation 90.6 218.5 277.8

Int. & Fin. charges 0.3 0.0 0.0

Other Income 226.8 436.9 617.3

Extraordinary items 0.0 0.0 0.0

EBT 4808.0 6774.2 9437.8

Tax 226.2 1287.1 2642.6

APAT 4576.2 5487.1 6795.2

BALANCE SHEET STATEMENT (Rs.mn)

As on 31st March FY10 FY11E FY12E

Equity Share Capital 2886.7 3282.3 3282.3

Reserves 15391.6 30385.2 36604.4

Net worth 18278.3 33667.5 39886.7

Preference capital 359.0 359.0 359.0

Total loans 0.0 0.0 0.0

Deferred tax -2.0 -2.1 -3.4

Capital Employed 18635.3 34024.4 40242.3

Gross Block 3257.9 4976.1 4976.1

Depreciation 189.7 408.2 686.0

Net block 3068.2 4567.9 4290.1

CWIP 5102.6 5762.9 8141.4

Investments 789.8 3789.8 3789.8

Inventories 6225.7 9046.5 13141.2

Sundry debtors 403.8 568.6 803.4

Cash and bank 3630.5 11987.4 13681.8

Loans and advances 6240.0 7481.9 9725.2

Total Current assets 16517.3 29085.0 37352.5

Current Liabilities 6746.1 9046.5 13141.2

Provisions 96.5 134.7 190.3

Total Cur. liabilities 6842.6 9181.2 13331.5

Capital Deployed 18635.3 34024.4 40242.3

FINANCIAL RATIO STATEMENT

Y/E March FY10 FY11E FY12E

Growth (%)

Net Sales 84.2 39.4 41.3

EBITDA 89.0 40.3 38.8

Adjusted Net Profit 89.1 21.5 23.8

Profitability (%)

EBIDTA Margin (%) 59.6 60.0 59.0

Net Profit Margin (%) 58.4 50.2 44.0

ROCE (%) 27.6 24.1 23.8

ROE (%) 28.1 21.1 18.5

Per Share Data (Rs.)

EPS (Rs.) 15.6 16.7 20.7

CEPS (Rs.) 16.2 17.4 21.5

BVPS (Rs) 63.3 102.6 121.5

Valuation

PER (x) 16.0 15.0 12.1

PEG (x) - 2.2 0.5

P/BV (x) 4.0 2.4 2.1

EV/EBITDA (x) 14.8 10.8 7.6

EV/Net Sales (x) 8.8 6.5 4.5

Gearing Ratio

D/E 0.0 0.0 0.0

Source: Company, Sushil Finance Research Estimates

CASH FLOW STATEMENT (Rs.mn)

Y/E March FY10 FY11E FY12E

PBT 4808.0 6774.2 9437.8

Depreciation & Amor 88.9 218.5 277.8

Chg.in Working Capital 87.0 -1872.3 -2422.8

Cash Flow from Operating 4757.1 3833.2 4649.0

Chg.in Gross block -421.2 -1718.2 0.0

Chg. WIP -1252.0 -660.3 -2378.5

Chg.in Investments -640.2 -3000.0 0.0

Cash Flow from Investing -2313.4 -5378.5 -2378.5

Chg.in Debt -107.1 0.0 0.0

Chg.in Share Cap 2860.7 395.6 0.0

Chg.in Pref. Share Cap -212.0 0.0 0.0

Chg.in Reserves 824.6 -16623.0 -6219.2

Dividend -1175.1 -384.0 -576.0

Cash Flow from Financing -482.2 9902.1 -576.0

Cash at the End of the Year 3630.5 11987.4 13681.8

April 18, 2011

14

Oberoi Realty Ltd.

Annexure: Oberoi Garden City:

Source: Company

Project Details

Project Name Type Status Saleable Area (SF)

Booked Area (SF)

Estimated

Completion Date

Oberoi Woods Residential Completed 598,200 595,209 - Oberoi Townhouse

Residential Completed 39550 5,650 -

Oberoi Exquisite I Residential Ongoing 1,448,040 750,090 Nov 2013 Oberoi Exquisite II Residential Ongoing 1,331,520 - May 2014 Oberoi Exquisite III

Residential Planned 2,376,280 - Mar 2015

Commerz - I Commercial Completed 423,786 281,475 - Commerz –II Phase- I

Commercial Ongoing 725,769 - Dec-2011

Commerz –II Phase- II

Commercial Ongoing 1,661,650 - Dec-2012

Oberoi Mall Retail Completed 552,893 505,925 - Westin Hotel Hospitality Completed 381,820 - - Oberoi International School

Social Infrastructure

Completed 305,309 - -

Education Complex

Social Infrastructure

Planned 866,130 - Apr-2013

Hospital Social Infrastructure

Planned 375,481 - Apr-2013

Total 11.1 MSF 2.1 MSF

Oberoi Garden city

Residential

Oberoi Woods & Oberoi

Townhouse

Oberoi Exquisite (I & II)

Oberoi Exquisite (III)

Commercial

Commerz I

Commerz II (Phase I & II)

Retail

Oberoi Mall

Hotel

The Westin Hotel

Social Infrrastructure

Oberoi International

School

Hospital & Education Complex

Completed Projects

Ongoing Projects

Planned Projects

April 18, 2011

15

Oberoi Realty Ltd.

Oberoi Splendor – Andheri (E) :

Source: Company

Project Details -

Project Name Type Status Saleable Area (SF)

Booked Area (SF)

Estimated Completion

Date

Oberoi Splendor Residential Ongoing 1,279,152 1,183,413 Apr-2011 Oberoi Splendor Grande

Residential Ongoing 283,920 85,540 Mar 2013

Oberoi Splendor Prisma

Commercial Ongoing 711,577

- Nov 2013

OberoiSpendor Maxima

Commercial Ongoing 318,804

- May 2014

Oberoi Splendor IT Tower

Commercial Planned 93,873

- Mar 2015

Oberoi Splendor School

Social Infrastructure

Planned 430,990

- -

Total 3.1 MSF Source: Company

Oberoi Splendor

Residential

Oberoi Splendor

Oberoi Splendor Grande

Commercial

Oberoi Splendor Prisma

Oberoi Spendor Maxima

Oberoi Splendor IT Tower

Social Infrrastructure

Oberoi Splendor School

Ongoing Projects

Planned Projects

April 18, 2011

16

Oberoi Realty Ltd.

Oasis Realty – Worli:

Source: Company

Project Details -

Project Name Type Status Saleable Area (SF)

Estimated Completion Date

Oasis Residential

Residential Ongoing 1,541,738 Dec-2015

Oasis Commercial

Commercial Ongoing 242,290 Dec-2014

Oasis Mall

Retail Ongoing 121,095

Dec 2014

Oasis Hotel Hotel Ongoing 215,280

Dec-2015

Total 2.1 MSF Source: Company

Oasis Realty (30%)

Residential

Oasis Residential

Commercial

Oasis Commercial

Hotel

Oasis Hotel

Retail

Oasis Retail Ongoing Projects

April 18, 2011

17

Oberoi Realty Ltd.

Oberoi Exotica

Residential

Exotica I

Exotica I

Oberoi Exotica – Mulund (W):

Source: Company

Project Details – Source: Company

Project Name

Type Status Saleable Area (SF)

Estimated Completion Date

Exotica I Residential Planned 1,619,800 Dec-2015

Exotica II Residential Planned 1,581,580 Dec-2014

Total 3.2 MSF

Planned Projects

April 18, 2011

18

Oberoi Realty Ltd.

Rating Scale

This is a guide to the rating system used by our Equity Research Team. Our rating system comprises of six rating categories, with a corresponding risk rating.

Risk Rating

Risk Description Predictability of Earnings / Dividends; Price Volatility

Low Risk High predictability / Low volatility

Medium Risk Moderate predictability / volatility

High Risk

Low predictability / High volatility

Total Expected Return Matrix

Rating Low Risk Medium Risk High Risk

Buy Over 15 % Over 20% Over 25%

Accumulate 10 % to 15 % 15% to 20% 20% to 25%

Hold 0% to 10 % 0% to 15% 0% to 20%

Sell Negative

Returns

Negative

Returns

Negative

Returns Neutral Not Applicable Not Applicable Not Applicable

Not Rated Not Applicable Not Applicable Not Applicable

Please Note

Recommendations with “Neutral” Rating imply reversal of our earlier opinion (i.e. Book Profits / Losses).

Indicates that the stock is illiquid With a view to combat the higher acquisition cost for illiquid stocks, we have enhanced our return criteria for such stocks by five percentage points.

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