Oberoi Realty faces downgrades amid weak pre-sales, growth concerns

Oberoi Realty sales bookings stood at Rs 480 crore in the June quarter, down 37 percent from the year-ago period and 29 percent from the previous quarter

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Oberoi Realty Ltd, which has had a good run this year, has been downgraded by some brokerages following weak pre-sales figures in the first quarter of the current financial year. Limited growth visibility is a concern, too, primarily due to the absence of new projects launches in the near term.

Brokerage firms Kotak Institutional Equities, Motilal Oswal Securities and CLSA have downgraded the stock to “reduce”, “neutral” and “sell”, respectively.

Jefferies India has stuck to the “hold” call, HDFC Securities to “buy” rating and Nuvama Research remains “neutral” on the stock. These brokerages have left the target largely unchanged.

Muted quarter

Oberoi Realty had a subdued June quarter, with sales bookings at Rs 480 crore, down 37 percent year on year (YoY), and 29 percent quarter on quarter (QoQ). The sales were also 39 percent below analysts’ estimates.

The muted performance can be attributed to a drop in sales velocity across projects in Mumbia’s Borivali, Goregaon, and Mulund compared to the previous year.

The lack of sales in the luxury 360-west project in Mumbai in the June quarter, as opposed to the three units sold in the previous quarter added to the decline. The total number of units sold also declined from 164 in 1QFY23 to 110 in the June quarter.

In an earlier report, Motilal Oswal said FY24 would be a significant year for Oberoi Realty, as the company was planning to launch Rs 120 billion worth of projects in the second half of the fiscal. These launches were expected to drive a 74 percent growth in pre-sales during FY24. To sustain a healthy growth rate of 15-20 percent, the company would need to continuously add new projects to its pipeline, the report said.

” However, with lot of projects (two projects in Thane, GSK-Worli, Peddar Road, Tardeo redevelopment, Andheri redevelopment), already in the plate which are yet to be launched, we believe the management may adopt a cautious approach toward business development and will unlikely be aggressive in pursuing new acquisitions,” Motilal said in its latest report.

Nuvama Research said the upcoming launches and new project additions would determine the stock’s trajectory.

“We are generally constructive on the residential real estate space; however, the recent sharp run-up in stock prices has made us picky to back players that have a more aggressive business development and launch
pipeline and we would re-visit Oberoi Realty at more opportune levels,”
Kotak in its latest report.

Oberoi Realty has gained 28 percent this year and 22 percent in the last three months, which is in line with the performance of Nifty Realty. This uptrend can be attributed to improved macroeconomic sentiments for the real estate sector, following the rate hike pause in April 2023. The company has also benefited from sustained demand momentum, contributing to its impressive performance in the market.

At 9.34 am, the share was trading at Rs 1,112 on NSE, up 0.34 percent higher from the previous close.

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