MUMBAI: We maintain a ‘buy’ rating on Oberoi Realty Ltd and revise our target price to Rs 252 (earlier Rs 263) on account to pending FSI costs and lower cash balance. The company has high-quality land parcels, strong brand and a robust balance sheet.
We believe Oberoi's prices for its projects are on an even footing compared with others. Even with a fall in prices in Mumbai, we believe the company's strong brand backed by its execution will enable it to cash in on the pent-up demand.
With net cash of Rs 1,000 crore as of March 2013 and no debt on books, the company has insulated itself from rising interest rate cycle to a large extent and is positioned to augment land bank in case of a correction in land prices.
Oberoi reported a weak third quarter with revenues of Rs 170 crore as against estimate of Rs 210 crore, owing to lower sales and slightly slower execution in Oberoi Exquisite. Ebitda margins at 53% were in line with estimates. Ebitda and PAT at Rs 89.8 crore and Rs 68.1 crore were lower than our estimate of Rs 112.9 crore and R86.7 crore, respectively. Cash balance fell substantially by Rs 290 crore to Rs 450 crore in the third quarter due to Rs 100 crore of construction spends on Oasis, Worli and Rs 130 crore of fungible FSI purchased during the quarter.