Hem Securities has suggested BUY rating on Oberoi Realty Limited with a target price of ₹2197, indicating a 16.12% upside from the current market price of ₹1892. Oberoi Realty, a leading real estate developer, has demonstrated strong financial performance and solid growth potential in its upcoming projects, particularly in Mumbai’s Metropolitan Region (MMR). The company’s diverse portfolio, disciplined land acquisition strategy, and strong brand presence position it well for sustained long-term growth in the competitive real estate sector. Investors are encouraged to consider Oberoi Realty for both short- and long-term appreciation.

Key Financial Performance and Outlook

- Revenue Growth: Consolidated revenue rose by 54% YoY and 6.84% QoQ to ₹1405 crore in Q1 FY25. - EBITDA Margin: Increased by 592 basis points YoY to 58.0%, reflecting operational efficiency despite a slight QoQ decline. - PAT Margin: Grew by 625 basis points YoY to 41.6%, showcasing robust profitability. - Price Performance: The stock has delivered a 63.41% return over the past year, outperforming broader indices such as Nifty Realty.

Management Commentary and Future Projections

The management is optimistic about crossing the ₹1000 crore mark in rental income by FY25, driven by strong leasing traction in its office portfolio. Key upcoming launches include projects in Pokhran, Thane, and Borivali. The Glaxo Worli mixed-use development is expected to add approximately ₹800-₹900 crore in annual rental income. Oberoi Realty also anticipates significant contributions from its Adarsh Nagar and Gurugram projects, which are slated for launch by early 2025.

Target and Valuation

Hem Securities values Oberoi Realty at 32.5x FY26 earnings, setting a target price of ₹2197, which represents a 16.12% upside from its current price. With a strong sales pipeline and disciplined cost management, the company’s valuation remains attractive for long-term investors.

Investment Rationale

1. Strategic Market Position: Oberoi Realty's focus on premium developments in the Mumbai Metropolitan Region (MMR) positions it in one of the most lucrative real estate markets in India. The company has over 45.3 million square feet of developable area across prime locations.
Strong Cash Flows and Sales Momentum: The company is well-capitalized with strong cash generation, ensuring it can finance future projects without over-leveraging. Oberoi Realty’s projects have consistently performed well in their launch phases, with an average of 33% of inventory sold within the first year of launch.

Diversified Portfolio: The company’s portfolio spans residential, commercial, and hospitality sectors. Projects like Oberoi Mall and The Westin Mumbai Garden City contribute significantly to rental income, providing stability alongside real estate sales.

Risk Factors

1. Interest Rate Sensitivity: As interest rates directly influence real estate demand, any increase in borrowing costs could dampen sales in the residential segment.
Macroeconomic Factors: Uncertainty in government policies, economic downturns, or changes in demographic preferences may adversely impact real estate demand and profitability.

Conclusion

Oberoi Realty is poised to benefit from favorable market dynamics and its established brand in the high-end real estate sector. The company’s strong financials, strategic project pipeline, and disciplined management approach make it a compelling investment opportunity. Hem Securities' recommendation to buy with a target of ₹2197 reflects confidence in the company's ability to continue delivering shareholder value over the long term.