Fate of Oberoi Realty stock depends on upcoming launches

Fate of Oberoi Realty stock depends on upcoming launches

Market


Ever since Oberoi Realty Ltd declared its June quarter (Q1FY23) earnings after market hours on Friday, shares of the Mumbai-focused company have gained 6% on NSE, despite some disappointments. Pre-sales at 761 crore fell 18% sequentially to a four-quarter low. Reducing inventory of ready projects, seasonality, and higher stamp duty were responsible for the muted sales bookings, analysts said. There were no project launches or business development deals during the quarter.

So, why are investors in the stock excited? One reason could be that the company received the much-awaited occupancy certificate (OC) for Three Sixty West, its ultra-luxury project in Worli. The management told analysts that it expects to close significant deals for this project in the near term.

Holding on

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Holding on

“There were no big positive surprises in Oberoi’s Q1 result. In fact, bookings were subdued, but OC for the Worli project has come as a big sentiment boost for the stock,” said an analyst, requesting anonymity. In the case of rivals Macrotech Developers Ltd (Lodha) and DLF Ltd, pre-sales trajectory improved once clearances were received for their luxury projects The Park and The Camellias, respectively, the analyst pointed out.

Oberoi expects a realization of 110,000-120,000 per sq ft on the carpet area for this project. This is 10-20% higher than the current average of the projects in the same locality, it told analysts.

Another key monitorable for the stock is the project launches in Thane. The sample apartment for its project along the Pokhran Road in Thane is ready and the project will be launched during the upcoming festive season, the management said. Oberoi is also targeting tower launches in Borivali (Sky City) and Goregaon (Elysian) in the second half of the year, given that the inventory in these projects has largely been exhausted.

However, home loan rates are rising and this will increase the total cost of buying a property. Thus, demand for residential housing needs to be watched closely. Further, Kotak Institutional Equities has factored in delay in commissioning of commercial and retail assets as well as monetization of development cash flows because of the delayed launch in Thane and sluggish sales in Three Sixty West so far.

Meanwhile, the Oberoi stock is trading at a premium to its net asset value of 820 because of a strong residential upcycle, said analysts at Jefferies India. Simply put, valuations capture most of the positives, leaving limited room for upsides in the stock from the current levels. That said, new project acquisition is a key upside trigger for the stock, according to analysts at Jefferies.

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