The share price of Oberoi Realty surged in trade on Tuesday as brokerages maintained a positive view on the stock. The stock closed 20 percent higher at Rs 467.70 per share on the NSE.
On Friday, the Mumbai-based real estate developer reported a flat consolidated net profit figure at Rs 137.74 crore on an yearly basis (YoY). The income declined 36 percent YoY to Rs 325 crore during the quarter ended September 30, 2020.
Despite the fall, the company's management has declared in its exchange filing that it has sufficient liquidity and expects to fully recover the carrying amount of its assets. The group will continue to monitor any material changes on future economic conditions, the filing added further.
CLSA maintains 'Outperform' recommendation
According to the brokerage, the company is planning to do a platform deal with investors to unlock the value of its rental portfolio and also to fund growth, with the aim to develop a strong rental portfolio, especially in the office segment.
In the residential segment, management targets to surpass FY20 presales in FY21, driven by new launches in 2HFY21, it added.
This comment by the company has made the brokerage to revise its valuation methodology for the stock. It lifted its price target from Rs 395 to Rs 440 (already surpassed in today's trade) while maintaining the 'Outperform' recommendation.
Jefferies raises upside scenario price target to Rs 574
Oberoi is planning to launch three projects in H2FY21 - Sky City Phase 2, Exquisite Phase 3 and Thane - which should help drive FY21 sales higher than FY20, said Jefferies report.
In case of pending launches, expect a 15 percent YoY decline in sales, it added.
On the lease income front, the brokerage explained that the management is reconsidering creating a lease asset platform with a private equity partner. It will likely shed a minority stake in the lease asset portfolio. This will help establish clear valuations, accelerate lease asset build-out and allow eventual REIT of the assets.
For malls, Oberoi is already offering a blanket 50 percent discount on FY21 base rentals and a 1-year lease extension. This can drive in Rs 145 million catch-up in mall revenues.
"We further expect cashflows to return to normal levels and construction pace to pick up in H2FY21," the report added.
Hence, it raised the price target to Rs 483 and upside scenario's TP to Rs 574 if the triggers mentioned above come through.
First Published: IST