Morgan Stanley has reiterated its ‘Equal Weight’ rating on Oberoi Realty, with a target price of ₹2,060, reflecting a 2.9% upside from the current market price (CMP) of ₹2,002.00. While the company reported strong growth in Q3FY25, key metrics missed Morgan Stanley’s estimates, leading to a cautious outlook.

Key Highlights:

  1. Pre-Sales Performance:
    • Pre-sales for Q3FY25 stood at ₹19.2 billion, up 22% QoQ on a last twelve months (LTM) basis.
    • However, pre-sales were 24% below Morgan Stanley’s estimates, primarily due to fewer bookings for 360 West during the quarter.
  2. Collections and Operating Cash Flow:
    • Collections for the quarter were strong at ₹14 billion, up 15% QoQ (LTM: +12% QoQ).
    • Operating cash flow (Op. CF) was weak at ₹3.7 billion (LTM: -3% QoQ), impacted by high capital expenditures of ₹15 billion.
  3. Revenue and Profitability:
    • Q3 revenue stood at ₹14.1 billion, showing a 7% QoQ and 34% YoY increase, with contributions from:
      • 360 West: ₹5 billion
      • Elysian: ₹3 billion
      • Rental Income: ₹2 billion
    • EBITDA margin came in at 61%, slightly down from 62% in Q2FY25.
  4. Concerns Highlighted:
    • Despite strong growth, high capex and weaker-than-expected pre-sales in 360 West have raised concerns over cash flow sustainability.

Morgan Stanley’s Take:

Morgan Stanley acknowledges the strong momentum in pre-sales and collections but notes the underperformance in 360 West bookings and weaker operating cash flow amidst elevated capex. The brokerage maintains a cautious stance, citing the need for improved execution and cash flow management.

CMP and Target:

  • Current Market Price (CMP): ₹2,002.00
  • Target Price (TP): ₹2,060
  • Upside Potential: 2.9%

Conclusion:

Morgan Stanley views Oberoi Realty as fairly valued at current levels, with limited upside potential. While the company has shown strong growth, the miss on expectations and cash flow challenges warrant a measured outlook.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisors before making investment decisions.

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