Demand triggers may help Oberoi Realty sustain higher sales trajectory

Target prices suggest further upside for the stock

Strong sales growth in the Mumbai realty market, receipt of the occupancy certificate for a key project and new launches are key triggers for Oberoi Realty. The stock recently hit a 52-week high and is poised to make additional gains, given the positive outlook by brokerages.

The immediate trigger for the stock and the key highlight in the September quarter, according to Dolat Capital, is the strong sales traction seen in the uber luxury project, Three Sixty West, after the company received the occupancy certificate. At least four units in the project have been sold during the quarter. The promoters of air cooler-maker Symphony have reportedly bought a unit in the premium project for Rs 72.68 crore.

The company is eyeing sales of 100 units in the project over the next three years. Say Pritesh Sheth and Sourabh Gilda of Motilal Oswal Research, “While the company has set ambitious sales targets for Three Sixty West, we retain our FY23 pre-sales estimates at Rs 4,800 crore with contribution of Rs 750 crore coming from Three Sixty West. We will closely monitor the pick-up in sales and pricing trajectory for the project from hereon and revise our estimates accordingly.”

The traction in the Mumbai market is another trigger. Despite hikes in mortgage rates and the inauspicious Shraadh period, residential units registered in Mumbai saw an 11 per cent rise in September. The sales at 8,628 units was the best performance for September in a decade. Sales growth in the Mumbai market year-to-date have also exceeded the annual pre-pandemic sales.

If the company is able to achieve full year sales of Rs 4,800 crore, it would sustain the rising trend of pre-sales over the last couple of years. Pre-sales improved from Rs 3,200 crore in FY21 to Rs 3,900 crore in FY22, a growth of 19 per cent.

While the sales traction in the luxury project is a positive, ongoing sales at its Borivali, Goregaon and Mulund projects are expected to help the company post bookings of Rs 850 crore in the September quarter which would be 12 per cent higher than the year-ago period. The company ended June quarter with pre-sales of Rs 760 crore.

Ambit Capital has turned positive on the stock and has a 'buy' as compared to a 'sell' rating earlier. This is on account of the clarity in the Thane project launch which is expected in the second half of the year and occupancy certificate for Three Sixty West, which together account for 25-30 per cent of valuation. Ambit assigns a 20 per cent premium to the company’s net asset value, given the premium positioning and non-Mumbai expansion underway.

At the current price, the stock, which has gained 21 per cent over the past three months, is trading at 18.2 times its FY24 earnings estimates. Target prices of brokerages are around the Rs 1,100 mark, which offers an 18 per cent upside from current levels.