Oberoi Realty Complete Fundamental Analysis and Future Outlook
Oberoi Realty has 30+ years of presence in India and has developed landmark buildings across commercial, residential, retail and hospitality segments. They have 27.43 million sq. ft of area under construction in FY 2019.
- The company has popular developments under the name Oberoi Mall, Commerz, The Westin Mumbai garden city etc. They have completed a total of 42 projects at strategic locations across the Mumbai Skyline.
- Oberoi realty operated in an asset-heavy industry where a lot of capital gets tied up in construction and inventory. Their industry structure is also such that there are lots of small developers in the market.
- Oberoi realty has strategically placed themselves in the higher strata and is focused on developing premium properties especially in metro regions like Mumbai.
- Reforms like GST, Insolvency Code, RERA, and other similar initiatives have formalized the construction sector in India. The only concern remains is the capital intensity and NBFC crisis. However, Oberoi realty stands to benefit from this in the long term because of zero debt in their capital structure
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis on my blog.
Source: Oberoi Realty Fundamental Analysis and Future Outlook
Based on my analysis all the stocks above 3 stars are good investments for the long term.
Some insights for the coming years from management discussion & analysis (MD&A) and con calls are as follows.
- The Management hopes that the recent changes in the real estate regulations like RERA and other events like demonetization, GST and NBFC crisis will lead to consolidation in the industry. The company will benefit in the long run due to its strong balance sheet.
- The impact of COVID-19 lockdown is hard to gauge on the real estate sector. The future demand will depend on credit availability by the banks which can face severe NPA problems due to the lockdown.
- The construction of leasing businesses is on track for the company. The tentative schedule for completion of these projects is Borivali Mall in FY 2021, I-ven Mall in FY 2022 and I-ven office in FY 2023.
- For the buildings which are nearing completion, the company is seeing good traction across its key projects like Enigma and Eternia (Mulund), Sky city (Borivali) etc. This will improve the revenue and inventory in the coming quarters.
The company has some growth opportunities but it will take time for that to start reflecting in the financial statements and the share prices. Credit availability after the lockdown will also be an important factor driving the real estate market in the coming years.
Therefore Oberoi Realty seems to be a very good investment in the real estate sector for the long term investment horizon.
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