Mumbai: We expect Oberoi’s cash flow visibility over the next 12-15 months to improve as a result of the imminent launch of the Mulund residential project, for which we expect strong initial presales of between R1,000-1,200 crore by Q4FY15. We also expect improving Exquisite sales bookings as the project is nearly ready for possession; good construction progress at Esquire and Goregaon, which seems likely to drive about 30% revenue recognition, also a mock-up flat at Oasis-Worli residencies, which seems likely to facilitate the launch and better sales with higher prices by early-2015; and good traction on leasing for its completed Commerz-II (0.7msf).

With near-term pre-sales still slower than our expectations and subsequently revenue recognition delayed, we have reduced our EPS by 17%-34% for FY15-17e. However, we still expect a 42% CAGR for Oberoi’s earnings over FY14-17e with a strong pick-up in FY16-17e—better than for most residential developers.

With prime location projects across Mumbai and a track record of superior execution, we believe it is the best positioned among its peers for pre-sale recovery. In our view, the worst of Mumbai’s pre-sales slowdown and regulatory delays are past and we see buyer sentiment improving.

We expect Oberoi’s strong presales of R1,500-1,800 crore and its construction progress significantly to enhance its cash flow over the next two years.