july 22, 2014 oberoi realty - business...

Real estate July 22, 2014

Oberoi Realty

Bloomberg: OBER IN Reuters: OEBO.BO

BUY

Institutional Equities

India Research

RESULT REVIEW

Recommendation

CMP: Rs245

Target Price: Rs296

Previous Target Price: Rs296

Upside (%) 21%

Stock Information Market Cap. (Rs bn / US$ mn) 81/1,336

52-week High/Low (Rs) 276/153

3m ADV (Rs mn /US$ mn) 165/2.7

Beta 1.0

Sensex/ Nifty 25,715/7,684

Share outstanding (mn) 328

Stock Performance (%) 1M 3M 12M YTD

Absolute (3.7) 9.7 26.4 4.8

Rel. to Sensex (6) (2.9) (0.9) (13.7)

Performance

Source: Bloomberg

Analysts Contact Parikshit Kandpal

022 6184 4311

[email protected]

150

200

250

300

15,000 17,000 19,000 21,000 23,000 25,000 27,000

Jul-

13

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Feb

-14

Mar

-14

Ap

r-1

4

Jun

-14

Jul-

14

Sensex (LHS) Oberoi (RHS)

Visible triggers

Oberoi Realty Ltd. (ORL) 1QFY15 Revenue, EBIDTA and Profit was 24.5%,

24.4% and 17.5% below our estimate, largely on account of Exquisite being

the only project contributing this quarter. Goregaon pre-sales has picked

up 42.1% QoQ signaling bottoming out of premium segment. With ~7mn

sqft of new launches planned for FY15E (Mulund ~3.2mn sqft, Borivali

~3.2mn, Worli – ~0.6mn sqft), ORL has visible triggers in place. We

maintain our BUY on ORL’s with NAV target of Rs296/share.

1QFY15 performance muted, pre-sales recovery strong

ORL 1QFY15 Consolidated Net revenue, EBIDTA & PAT de-grew 19.7%,

27.4% & 36.8% YoY respectively, below our estimates by 24.5%, 24.4% &

17.5% respectively. EBIDTA margin contracted by 587bps YoY to 55.3% on

account of lower revenue traction. The customer advances remains stable at

Rs6,740.6mn. Balance sheet remains strong with D/E at 0.19x. Pre-sales

momentum saw sharp pick up with 42.1% QoQ growth to 67,730sqft.

New launches of ~7mn sqft during FY15E ORL shall be launching the Worli project during 2QFY15E. Besides this ORL

is planning to launch Mulund (pending decision on review petition in

Supreme Court) & Borivali projects during 2HFY15E, with affordable luxury

theme. The ticket size for Borivali shall be Rs20mn/unit whilst for Mulund

Rs30mn/unit. These new launches shall provide much needed visibility on

pre-sales and launch success remain key re-rating trigger.

Best placed v/s Western peers ORL stands out as a leader in our competitive business mapping of the

Western developers. High land bank quality, superior brand recall and

relatively healthy access to finance are the key contributing factors. We

expect ORL to capture incremental market share outside home location and

deliver above industry average growth.

Maintain BUY: NAV target of Rs296/share We maintain BUY stance with a SOTP-based target price of Rs296/share. We

believe that the near-term catalysts are: (i) Mulund & Worli launch; (ii)

successful foray outside Mumbai & (iii) new land acquisitions.

Key risks: (i) Unaffordability may lead to a 8-10% real estate price; (ii)

Delays in new land acquisitions remains key de-rating trigger. Key Financial - Consolidated

Y/E Mar (Rs mn) FY12 FY13 FY14 FY15E FY16E

Operating income 8,247 10,476 7,985 17,177 28,428

EBITDA 4,835 6,121 4,348 10,296 16,428

Net profit 4,633 5,049 3,111 6,475 10,724

EPS (Rs) 14.1 15.4 9.2 19.7 32.7

RoCE (%) 17.3 17.3 10.8 19.8 26.0

P/E (x) 17.4 15.9 26.7 12.4 7.5

Source: Company, Karvy Institutional Research

2

Decceleration in sales – impact performance

ORL 1QFY15 Consolidated Net revenue, EBIDTA & PAT de-grew 19.7%,

27.4% & 36.8% YoY respectively, below our estimates by 24.5%, 24.4% & 17.5%

respectively.

EBIDTA margin contracted by 587bps YoY to 55.3% (in line with our

expectations) resulting in EBIDTA de-growth of 27.4% YoY, higher than

Revenue de-growth. Lower material expenses de-growth of 12.1% YoY and

higher employee expenses 20.8% YoY growth impacted negatively.

PBT de-grew 36.7% YoY, higher de-growth vs EBIDTA, owing to 69.2% YoY

de-growth in other income on lower cash balance.

ORL reported net profit of Rs643mn vs our expectation of Rs780mn, largely

attributable to lower than expected revenue growth.

Oberoi Realty recorded new sales of 67,730sqft (an improvement vs 4QFY14 –

47,675sqft) owing to (i) pick-up in sales in mid-cycle project viz. Exquisite which is

nearing completion (sold 13 units - 23,660sqft vs 8units - 14,560 sqft during

4QFY14) (ii) back ended CC & IOD in Esquire (sold 20 units - 44,070sqft vs 12

units - 26,595sqft during 4QFY14). ORL results were lower than our and

consensus estimates on account of slower recovery in Exquisite which is currently

under revenue recognition. The pre-sales momentum (growth of 42.1% QoQ)

indicates bottoming out of luxury segment sales which is a huge positive. Besides

newer launches in Mulund and Borivali are targeted at affordable luxury segment.

Exhibit 1: Quarterly Performance consolidated

Particulars 1QFY15 1QFY14 YoY (%) 4QFY14 QoQ (%)

Net Sales 1,754 2,184 (19.7) 2,206 (20.5)

Material Expenses (606) (689) (12.1) (758) (20.0)

Employee Expenses (117) (97) 20.8 (119) (1.8)

Other Operating Expenses (62) (63) (1.9) (75) (17.1)

EBITDA 969 1,335 (27.4) 1,254 (22.7)

Interest Cost (0) (1) (50.0) (1) (50.0)

Depreciation (100) (69) 44.6 (67) 48.5

Other Income 65 210 (69.2) 79 (18.3)

PBT 934 1,476 (36.7) 1,266 (26.2)

Tax (291) (457) (36.4) (496) (41.3)

Net Profit 643 1,018 (36.8) 770 (16.5)


Exhibit 2: Margin Analysis

as % Sales 1QFY15 1QFY14 YoY (bps) 4QFY14 QoQ (bps)

Material Expenses 34.5 31.5 299 34.3 19

Employee Expenses 6.7 4.4 223 5.4 127

Other Operating Expenses 3.5 2.9 64 3.4 15

EBITDA 55.3 61.1 (587) 56.9 (160)

Tax Rate 31.1 31.0 13 39.1 (802)

Net Margin 36.7 46.6 (994) 34.9 176


3

Pre-Sales momentum – sharp recovery 42.1% QoQ, 43.7% YoY

ORL has recorded sharp improvement in pre-sales volume with 1QFY15 new pre-

sales at 67,730sqft vs 47,675sqft during 4QFY14, a growth of 42.1% QoQ and 43.7%

YoY. The management sounded upbeat on change in sentiment post elections with

(i) Stable Government & (ii) expectations of economic recovery. As of now ORL is

holding on to prices and focusing on completing Exquisite (215 units in inventory,

current quarterly sales runrate 13 units). The projects is expected to be delivered

by Dec-13 and may see increased buying interest recovery post completion.

Esquire has witnessed increased momentum during 1QFY15 which is expected to

build onto 2HFY15E. Oasis Worli may get launched during 2QFY15E whilst

Mulund & Borivali projects may get launched end FY15E-1QFY16E.

Exhibit 3: 1QFY15 – new sales momentum indicates initial recovery in premium real estate

Pre-sales - msf 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15

Oberoi Esquire 0.13 0.07 0.07 0.06 0.07 0.05 0.05 0.03 0.02 0.02 0.03 0.04

Oberoi Exquisite 0.02 0.01 0.03 0.03 0.03 0.04 0.04 0.02 0.02 0.01 0.01 0.02

Oberoi Oasis - 0.11 - - -

Oberoi Priviera

0.00 -

Total 0.18 0.12 0.17 0.12 0.13 0.12 0.12 0.05 0.15 0.03 0.05 0.07

Pre-Sales - Rs mn

Oberoi Esquire 1,486 852 1,036 927 1,100 784 780 411 433 349 435 795

Oberoi Exquisite 276 229 442 495 488 781 740 478 385 226 352 564

Oberoi Splendor

Grande 413 403 651 374 345 311 202 36 - - 42

Oberoi Splendor 65 297 456 190 287 199 505 - 3,179 - -

Oberoi Oasis - - -

Oberoi Priviera

292

Total 2,239 1,780 2,585 1,986 2,220 2,074 2,227 925 3,997 575 1,122 1,359


Oberoi Esquire will hit revenue recognition during early 2HFY15E whilst Worli

project shall hit P&L during FY15E. ORL has done 23 units pre-sales in Worli

project and recorded 13 units as of 1QFY15. Unrecognized revenue in books stand

at Rs17,995mn besides Rs10bn of additional inventory in nearing completion

Exquisite project. ORL expects to sell out Exquisite over 18-24 months.

Exhibit 4: Cumulative sales trend

Project Area (msf)

Area sold as

of 1QFY15

(mnsf)

Sales Value

(Rs mn)

Average

realisation

(Rs/sqft)

PoCM (%)

Balance

Revenues to be

recognised (Rs

mn)

Cash to be

received (Rs

mn)

Oberoi Esquire 1.5 1.0 13,924 13,246 <20% 13,924 8,034

Oberoi Exquisite 1.5 1.1 14,712 13,431 96% 537 1,020

Oberoi Splendor Grande 0.3 0.3 4,187 14,599 100% - (123)

Oberoi Splendor 1.3 1.3 15,714 12,304 100% - 111

Oberoi Oasis 1.8 0.1 3,534 27,704 <20% 3,534 2,532

Oberoi Priviera 0.0 0.0 292 62,064 43% 0 0

Total 6.4 3.8 52,363 13,775 17,995 11,574


4

Updates on key projects Mulund Project – ORL management highlighted that with the Maharashtra

Government filing in review petition against the Supreme Court judgment dated

30th January 2014 providing relief to the developers on the forest land issue, the

Mulund project launch may get delayed by 2-3 Months to early 2HFY15E. Mulund

will have all phases launched at one go and ORL expects to complete the project in

3yrs. Currently the project is undergoing design changes to incorporate (i) EWS

housing & (ii) Supreme Court RG clause of providing 25% open space. The project

already has EC status (which is currently under routine revalidation) & IOD. EWS

will not impact Esquire & Exquisite as CC has already come for these project. ORL

is targeting the launch in the Rs30mn+ budget with 1500-1800sqft flat size.

Worli Project – ORL has already signed definitive agreement with Ritz Carlton,

and spend Rs9bn on the Residential portion (which is 50% of the total Residential

segment estimated cost) and Rs1bn on the Hotel. ORL has recorded sales of 13

units encompassing a saleable area of 0.12mn sqft with a revenue potential of

Rs3,533mn and average realization of Rs28,425/sqft. The last sale price was

Rs43,027/sqft. ORL expects Worli project to move into revenue recognition during

FY15E. ORL won’t be sharing any royalty fees on the branded residencies and Ritz

Carlton will be directly charging buyers for the services.

Commerz II – no pick up in leasing, though the building is ready to be leased out.

ORL expects leasing to start during next 6months.

Oberoi Esquire – The projects is expected to hit the revenue recognition threshold

during FY15E. There has been pick up in the sales with 20units sold during

1QFY15E vs 12 units sold during 4QFY14.

Balance continues to remain healthy ORL balance sheet remains healthy with 1QFY15 strong customer advances of

Rs6,740.6mn. During 1QFY15, ORL has availed debt financing of Rs6920.6mn for

part funding Rs11,550mn Borivali land acquisition. This has resulted in D/E

increasing to 0.19x, end 1QFY15. ORL needs to repay the NCD over 4yrs and

average cost would be about 11.25%. Loans and advances has increase by

Rs11,514mn largely attributable to Borivali land payment to Tata’s. Post

completion of all formalities the land will move into inventory.

Exhibit 5: Consolidated – Balance sheet

Rs mn 1QFY14 4QFY14 1QFY15 QoQ Change

Total fixed assets 10,713 10,995 10,986

Goodwill 2,654 2,654 2,654

Investments 3,481 496 788 292

Inventories 14,060 16,491 17,435 944

Sundry debtors 370 862 520

Cash and equivalents 5,255 4,997 1,574 (3,424)

Loans and advances 17,091 18,321 29,835 11,514

Other current assets 53 54 46

Total current assets 36,829 40,725 49,408

Sundry creditors/others 10,083 9,138 11,300 2,162

Provisions 782 789 788

Total current liabilities 10,865 9,926 12,088

Total Assets 42,811 44,944 51,748

Source of Funds 42,811 44,944 51,748

Source: Company

5

Investment Rationale

Strong balance sheet lends scope for locational diversification

outside home location

Regional to Top 8 cities aspiration is driving domestic realty players to diversify

outside their core regions. Whilst we believe that pan India theme has its own

challenges we expect ORL’s competitive position to change in markets outside its

core. NCR now contributes 15% to Sobha’s sales volume and we expect similar

numbers to pan out for Oberoi on back of strong brand recall replication in other

markets. Moreover, a relatively debt free balance sheet augurs well for any

acquisition opportunity in newer markets though ORL remains focused on JDA

(Joint development agreement) model of diversification.

Exhibit 6: Strategy to move out of home markets

Mumbai Pune NCR Bangalore Chennai Hyderabad Overall Comments

DLF

Broad based presence across markets, strong

competitive positioning, though Mumbai exit

remains key dampener

Oberoi

Diversification outside Mumbai remains key re-

rating trigger; we see strong change in competitive

positioning over next 2-3yrs with NCR, Bangalore

markets as new additions. We estimate new

markets to contribute 10-15% to volumes

Sobha

Successful NCR foray sets tone for a stronger

growth outside home turf Bangalore. We rate

Sobha as a mid-quartile

Prestige

Middling in most regions. Competitive positioning

in Bangalore remains strong, Chennai

consolidating

Puravankara

Middling on most locations. Bangalore & Chennai

remain dominant regions. Looking to diversify

outside the home markets

Godrej

We rate Godrej as a mid-quartile for diversification

outside Mumbai. Launches have met with strong

success. Brand leveraging will help further

consolidation in the competitive positioning

Kolte

Middling on most locations. Kolte is a dominant

Pune player with emerging presence in Bangalore

where it is looking to further consolidate and

improve market share, whilst in Mumbai the

company is looking towards its first launch.

Source: Karvy Institutional Research; Note: Strong; Relatively Strong; Average; Relatively Weak Weak

Gaining market share in newer location offers an option value and should a

developer exercise this option successfully the growth can be ahead of industry. It

remains as a long term option to be exercised and a potential re-rating trigger for

ORL.

6

Dominant Western markets positioning

As highlighted in the thematic section of the note, ORL is best placed amongst the

Western peers on account of its superior land bank quality, access to finance,

healthy balance sheet and high potential for successful foray in newer markets.

The micro factors are well supported by strong execution, quality construction &

management bandwidth. We highlight our finding in exhibit 7 to arrive at overall

competitive positioning.

Exhibit 7: Overall competitive positioning of real estate developers

Macro

Competitive

- 30% weight

Business

Competitive -

25% weight

Land bank

& Pricing -

20% weight

Balance

Sheet

positioning

- 25%

weight

Overall Comments

Oberoi

Top quartile with no debt, higher return ratios and strong

cash-flows

Godrej

A top quartile on macro competitive whilst mid-quartile

on all other parameter. High leverage is the key overhang.

We rate it a mid-quartile

HDIL

Middling in all parameter

Hiranandani

Raheja


Sunteck

Overall a Mid -quartile on back of low leverage, high

return ratios

Wadhwa


Kolte Patil

A Mid -quartile on all parameters

Source: Karvy Institutional Research; Note: Strong; Relatively Strong; Average; Relatively Weak Weak

On overall competitive positioning, we find that the top real estate players

include Oberoi, Godrej, Hirandandani & Sunteck in Western markets. ORL with

the right mix of branding, execution capability, balance sheet strength and

underlying business fundamentals remains best poised amongst the peers.

Notwithstanding their scores differ on these factors we see limited differentiation

on an overall basis.

7

Valuation – Maintain NAV of Rs296/share

SOTP Valuation We have adopted DCF methodology to arrive at ORL’s NAV/share. We value the

residential real estate business at Rs161/share, hotels at Rs21/share, commercial

annuity assets at Rs90/share, social infrastructure at Rs10/share, other assets at

Rs15/share and net debt (Rs1) to arrive at total SOTP valuation of Rs296/share for

the Company. We don’t ascribe any NAV discount to ORL as we have only valued

the projects which have visibility over the next 5years. For land bank beyond 5

years we ascribe 1x P/BV for invested equity.

Exhibit 8: Sum of the Parts

Rs mn Rs/share Comments

Gross NAV Residential 52,887 161 NAV based on the methodology discussed below

Gross NAV Hotels 6,961 21 8x FY15E EV/EBIDTA

Gross NAV Commercial 29,599 90 NAV based on the methodology discussed

Social Infra 3,134 10 discounting at 12% cap rate viz. school, hospital etc

Other Assets 4,911 15 investments in other projects at 1x P/BV,viz. Sangam city, Juhu hotel etc

Less: Net Debt 258 (1) Increase in debt to Rs8bn has resulted in ORL being a Net debt company

NAV 97,235 296

Source: Karvy Institutional Research

Real estate development – NAV calculation methodology

We have divided ORL’s entire land bank into residential projects (based on the

information given by the company)

We have arrived at the sale price/sq ft. and the anticipated sales volumes for

each project based on our discussions with industry experts

We have deducted the cost of construction based on our assumed cost

estimates which have been arrived at after discussions with industry experts

We have further deducted marketing and other costs which have been

assumed at 5% of the sales revenue

We have then deducted income tax based on the tax applicable for the project

The resultant cash inflows at the project level have been discounted based on

WACC of 14% (cost of equity 14% based on beta of 1x & debt/equity ratio of

0x). All the project level NAVs have then been summed up to arrive at the

NAV of the company

For commercial office we have discounted rentals using 14% WACC for the

forecasted period and terminal value using the cap rate of 11%

Social infrastructure created by ORL viz. School, Hospital etc has been

discounted using cap rate of 12%

Other assets have been valued at 1x P/BV of invested equity

From the NAV, we have deducted the net debt as of FY15E to arrive at the

final valuation of the company.

Location Gross NAV

(Rs mn)

Rs/

Share

Residential

Goregaon 13,716 42

JVLR 6,943 21

Worli - Residential 8,132 25

Mulund 11,421 35

Borivali 12,675 39

Total Residential 52,887 161

Hotels

Westin Hotel 4,085 12

Worli Hotel 2,876 9

Total Hotel 6,961 21

Commercial

Commerz-All Phases 20,712 63

Oberoi Mall 6,274 19

Worli Commercial 2,613 8

Total Commercial 29,599 90

Grand Total 89,448 273


8

Key valuation assumptions

In exhibit 9 we highlight our sales and cost inflation forecasts. We expect property

price appreciation in line with WPI inflation i.e. 5%. We forecast other costs

including marketing, SGA and employees’ costs at 5% of sales.

Exhibit 9: Base case assumptions

Discount rate 14%

Annual rate of inflation-sales price 5%

Annual rate of inflation-cost of construction 5%

Other costs – marketing, SGA, employee cost (as % of sales) 5%

Tax rate (%) 33%


In the exhibit 10 we highlight our sale price and construction cost forecasts. Our

pricing assumptions are moderate and at a 0-10% premium to the current

prevailing prices on account of ORL 15-20% brand premium vs peers.

Exhibit 10: Base property price and construction cost assumptions

Location Prices Cost

Rs/sq ft Rs/sq ft

Goregaon 14,000 5,500

Worli 35,000 7,500

Mulund 11,500 4,000

Borivali 12,000 5,000

JVLR 13,500 5,000


9

Key catalysts

Worli & Mulund launches

ORL has unsold inventory of ~12.2mn sqft as of end FY14 and has planned 7mn sq

ft of new launches over FY15E (Mulund-3.2mn sqft, Borivali – 3.2mn sqft, Worli

gross profit share 0.6mnsqft). Whilst FY14 has been dismal in new sales (total area

sold 277,144sqft a de-growth of ~43% YoY) owing to delay in launches, we build in

strong recovery for FY15E on back of Mulund, Borivali and Worli launches. ORL

has set priority with Worli launch by 1HFY15E, Mulund launch – by 3QFY15E,

Borivali launch FY15E end. Besides Oberoi Exquisite & Oberoi Esquire has unsold

inventory of ~1mn sqft. Hence sales velocity will be key re-rating trigger.

Change in product mix can impact margin on upside

Whilst historically ORL margins have been in 55-60% range owing to low

historical land bank cost and increasing contribution from annuity assets. With the

Worli revenues hitting P&L the margins may expand as the project revenue will be

booked post deduction of construction costs hence the margins will be above

ORL’s EBIDTA margins resulting in positive earnings surprise.

Successful foray outside Mumbai

ORL is looking to enter NCR and has signed a MOU for a ~5mn sqft of joint

development. Any success in signing a definitive agreement remain key trigger for

the stock re-rating.

Key risks to our BUY stance

Correction in property prices

Western markets have 37months of unsold inventory and current property prices

have crossed previous highs making market unaffordable. Whilst ORL is focused

on premium residential developments and has been sticky on holding prices any

correction may be detrimental to our valuation assumptions. For every 1%

correction in base residential prices, our NAV estimate for ORL will be negatively

impacted by 3%.

Liquidity tightening may result in cash flow pressures

The tightened liquidity scenario has led to developers evaluating current

repayment needs versus new launches. Hence cash flows from existing projects

may be utilized for retiring debt rather than reinvestment in new project launches.

The sustained liquidity tightening may impact new launches and thereby the

momentum in cash flows. Whilst this is a generic risk for the sector, ORL is

relatively unimpacted owing to relatively strong balance sheet.

10

Financials - Consolidated

Exhibit 11: Profit & Loss

Y/E Mar (Rs mn) FY12 FY13 FY14 FY15E FY16E

Net sales 8,247 10,476 7,985 17,177 28,428

Growth (%) (17.2) 27.0 (23.8) 115.1 65.5

EBITDA 4,835 6,121 4,348 10,296 16,428

EBITDA margin (%) 58.6 58.4 54.5 59.9 57.8

Growth (%) 1 (0) (7) 10 (4)

Depreciation 269 285 272 348 558

EBIT 4,565 5,836 4,076 9,949 15,870

Net Interest 3 4 3 630 512

Other income 1,501 999 571 310 490

PBT 6,063 6,831 4,644 9,628 15,848

Taxes 1,430 1,783 1,533 3,154 5,124

Net profit 4,633 5,049 3,111 6,475 10,724

Margin (%) 56.2 48.2 39.0 37.7 37.7

EPS (Rs) 14.1 15.4 9.2 19.7 32.7


Exhibit 12: Balance Sheet

Y/E Mar (Rs mn) FY12 FY13 FY14E FY15E FY16E

Share capital 3,282 3,282 3,282 3,282 3,282

Reserves & surplus 34,059 38,339 41,207 47,303 57,400

Networth 37,341 41,621 44,489 50,585 60,682

Debt - - - 8,000 6,500

Deferred tax liability 78 147 147 147 147

Sources of funds 37,420 41,769 44,637 58,733 67,329

Net block 7,009 6,867 10,147 10,249 14,684

CWIP 2,841 3,848 1,194 1,413 -

Goodwill 2,654 2,654 2,654 2,654 2,654

Current assets 35,338 39,522 42,970 58,808 69,294

Inventory 10,196 12,448 16,956 20,515 25,744

Sundry debtors 679 522 437 1,018 1,664

Cash & bank balance 12,934 10,725 8,698 7,742 12,252

Loans & advances 11,529 15,827 16,878 29,534 29,634

Current liabilities &

provisions 10,423 11,121 12,327 14,393 19,303

Net current assets 24,916 28,401 30,643 44,416 49,990

Application of funds 37,420 41,769 44,637 58,733 67,329


11

Exhibit 13: Cash flow statement

Y/E Mar (Rs mn) FY12 FY13 FY14E FY15E FY16E

PBT before minority 6,063 6,831 4,361 9,628 15,848

Depreciation/amortisation 269 285 287 348 558

Interest 1 0 4 630 512

Non oper. Income (1,481) (984) (565) (311) 823

Change in NWC -268 -3,016 -4,268 -14,730 -964

Tax (1,321) (1,698) (1,352) (3,154) (5,124)

Net cash from operations (a) 3,263 1,419 -1,534 -7,588 11,653

(Inc)/dec in investments -2,441 0 0 0 0

Capex -985 -1,181 -913 -670 -4,993

Others (2,399) (7,145) 600 310 490

Cash flow from inv. (b) -5,826 -8,325 -313 -360 -4,503

FCF (a+b) -2,563 -6,906 -1,847 -7,948 7,150

Inc/dec in loans - - - 8,000 (1,500)

Dividend/Others (382) (763) (180) (1,009) (1,139)

Financial cash flow ( c ) -382 -763 -180 6,991 -2,639

Net inc/dec in cash (a+b+c) -2,945 -7,669 -2,026 -957 4,511


Exhibit 14: Key Ratio

Y/E Mar (%) FY12 FY13 FY14E FY15E FY16E

EBIDTA margin 58.6 58.4 54.5 59.9 57.8

EBIT margin 55.4 55.7 51.1 57.9 55.8

Net profit margin 56.2 48.2 39.0 37.7 37.7

Return on capital employed 17.3 17.3 10.8 19.8 26.0

Return on equity 13.1 12.8 7.2 13.6 19.3

Dividend payout ratio 0.0 0.0 0.0 0.0 0.0

Current ratio (x) 3.4 3.6 3.5 4.1 3.6

Net debt/ Equity (x) (0.3) (0.3) (0.2) 0.01 (0.1)


Exhibit 15: Valuation Parameters

Y/E Mar FY12 FY13 FY14E FY15E FY16E

EPS (Rs) 14.1 15.4 9.2 19.7 32.7

Diluted EPS (Rs) 14.1 15.4 9.2 19.7 32.7

Book value per share 113.8 126.8 135.5 154.1 184.9

P/E (x) 17.4 15.9 26.7 12.4 7.5

P/BV (x) 2.2 1.9 1.8 1.6 1.3

EV/EBITDA (x) 14.0 11.4 16.5 7.8 4.5

EV/Sales (x) 8.2 6.7 9.0 4.7 2.6

Turnover ratios (no.)

Debtor days 86 90 70 70 70

Creditor days 196 127 127 283 283


Institutional Equities Team Rahul Sharma

Head – Institutional Equities /

Research / Pharma +91-22 61844310 [email protected]

Gurdarshan Singh Kharbanda Head - Sales-Trading +91-22 61844368/69 [email protected]

INSTITUTIONAL RESEARCH

Analysts Industry / Sector Desk Phone Email ID

Mitul Shah Automobiles/Auto Ancillary +91-22 61844312 [email protected]

Parikshit Kandpal Infra / Real Estate / Strategy/Consumer +91-22 61844311 [email protected]

Rajesh Kumar Ravi Cement/ Logistics/ Paints +91-22 61844313 [email protected]

Rupesh Sankhe Power/Capital Goods +91-22 61844315 [email protected]

Varun Chakri Research Associate +91 22 61844326 [email protected]

Vinesh Vala Research Associate +91 22 61844325 [email protected]

INSTITUTIONAL SALES

Celine Dsouza Sales +91 22 61844341 [email protected]

Edelbert Dcosta Sales +91 22 61844344 [email protected]

INSTITUTIONAL SALES TRADING & DEALING

Aashish Parekh Institutional Sales/Trading/ Dealing +91-22 61844361

Prashant Oza Institutional Sales/Trading/ Dealing +91-22 61844370 /71 [email protected]

Pratik Sanghvi Institutional Dealing +91-22 61844366 /67 [email protected]

For further enquiries please contact:

[email protected]

Tel: +91-22-6184 4300

Disclosures Appendix

Analyst certification

The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed

herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of

his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views

contained in this research report.

Disclaimer

The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information

contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for

the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any

loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all

investors. Investors must make their own investment decisions based on their specific investment objectives and

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or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Stock Broking nor any

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and views mentioned in this document.

The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above

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Stock Ratings Absolute Returns Buy : > 15% Hold : 5 - 15% Sell : < 5%

july 22, 2014 oberoi realty - business...

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