Oberoi Realty Valuation Excel Model and Intrinsic Value of Shares

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Oberoi Realty Valuation : About the Company

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.

The business model is very similar to other premium developers in India like Lodha and Godrej properties. The company develops premium commercial and residential properties which have high margins and low inventory turnover. The year FY 2019 brought in the consolidation of the real estate sector as the government’s new regulations started to take effect. The company is mostly developing projects in Mumbai. The State Government’s spending on infrastructure and improving connectivity has boosted the local market. This benefits the company in the long run. From here, we go ahead with Oberoi Realty Valuation and Intrinsic Value of its shares.

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Read more here: Oberoi Realty Shares Fundamental Analysis 

Methodology Used:

Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows. DCF analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future. The following step by step procedure is followed.

  1. Determining the Revenue Growth Rates
  2. Forecasting the Financial Statements
  3. Deriving the FCFF and FCFE
  4. Calculating the Terminal Value
  5. Calculating the Discount Rate
  6. Discounting the Cashflows
  7. Arriving at the Intrinsic Value of the Shares

You can also get the formula based DCF Excel Model from below:

Step 1: Determining the Revenue Growth Rates

We arrive at the below table by using the past and expected future performance of both the company and the economy. This along with adjustments to changes in the management expectations, extraordinary events and other macro factors give the revenue growth rates for Oberoi Realty Valuation.

Financial Year Revenue Growth Rate
Year 1 -12%
Year 2 -18%
Year 3 35%
Year 4 18%
Year 5 11%
Revenue Growth Rates: Oberoi Realty Valuation

Step 2: Forecasting the Financial Statements

The financial statements are forecasted for a period of 5 years using the annual report data of the company. The assumptions used for forecasting are tabulated below. The Excel model is completely editable and can be adjusted for specific changes which may happen over a period of time.

Financial Statements Forecast : Oberoi Realty Valuation
Financial Statements Forecast : Oberoi Realty Valuation

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Step 3: Deriving the FCFF and FCFE

Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available for distribution after accounting for depreciation expenses, taxes, working capital, and investments. FCFF is a measurement of a company’s profitability after all expenses and reinvestments. It is given as follows.

Free cash flow to equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt are paid. FCFE is a measure of equity capital usage.

F/S Items (INR Millions) Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Free Cash Flow to Firm 20690 5247 8359 10648 13509
Free Cash Flow to Equity 49015 -23599 38516 27916 22191
FCFF and FCFE values: Oberoi Realty Valuation

Step 4: Calculating the Terminal Value

Terminal value (TV) is the value of a business or project beyond the forecast period when future cash flows can be estimated. It assumes that a business will grow at a set growth rate forever after the forecast period. Terminal value often comprises a large percentage of the total assessed value.

Terminal Value Calculation Units INR Millions
Free Cash Flow to Firm 13508.91
Growth Rate 5.00%
Cost of Capital 16.11%
Terminal Value 127634.11
Terminal Value: Oberoi Realty Valuation

Step 5: Calculating the Discount Rate

DCF analysis helps assess the viability of a project or investment by calculating the present value of expected future cash flows using a discount rate. Here we use the Weighted average cost of capital (WACC) to discount the cash flow. The below table from the excel model shows the calculation of WACC for Oberoi Realty Valuation.

WACC Calculation for Oberoi Realty Valuation.
WACC Calculation for Oberoi Realty Valuation.

Step 6: Discounting the Cashflows

The WACC and the Cost of Equity for the company calculated in the above step are then used to discount the FCFF, FCFE and Terminal Value calculated in Step 3 and 4. In our case, we’ll only consider the FCFF based Intrinsic price of the shares as it represents the cash flow to all the suppliers of capital and not only to the equity shareholders. Thus we arrive at Present value of future FCFF for Oberoi Realty Valuation. (Units are INR Millions)

PV of FCFF and FCFE  for Oberoi Realty Valuation.
PV of FCFF and FCFE for Oberoi Realty Valuation.

Step 7: Arriving at the Intrinsic Value of the Shares

Dividing the PV of the FCFE and Terminal Value (the Value of the entire firm) by the number of outstanding shares we get the per share intrinsic value. We can compare this price with the current market price of the stock to get the Discount or Premium to its intrinsic price.

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Oberoi Realty Valuation Units
PV in INR Million 130613
No of Shares Outstanding (In Million) 358
Intrinsic Value 364.84
Current Market Price of Share 565
Current Discount/Premium 55%
Intrinsic Value of the Shares: Oberoi Realty Valuation

Oberoi Realty Valuation and Intrinsic Share Price = INR 364.84

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References: Investopedia
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(Note: All the research done by me is only for educational purposes and should not be seen as Investment recommendations. I am a Research analyst and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing)

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