Embassy Office Parks REIT Q4 Results Review - Encouraging Guidance For the Next Year: Axis Securities

Axis Securities Report

Outlook:

FY25E guidance: The Embassy Office Parks real estate investment trust has given FY25E guidance as follows:

Net operating income of Rs 3,210-3,350 Crore +10% YoY at midpoint, net distributable cash flow of Rs 2,120-2,190 Crore +7% YoY at mid-point, distribution per unit of Rs 22.4-23.1/unit.

The lower NDCF growth in comparison with the NOI growth is due to the higher interest costs and some non-cash NOI due to fresh leasing.

The guidance assumes gross leasing of 5.4 Million sq. ft, including 3.8 Million sq. ft of new leases, 1 Million sq. ft of precommitments and 0.6 Million sq. ft of renewals.

The management of Embassy REIT has also guided for 13% contractual escalations on a 7.7 Million sq. ft area, a 10% YoY increase in hotel NOI, and a 15-18% YoY increase in interest costs.

Key Risks to our Estimates and target price

• The economic slowdown may impact the company's profitability.

• Low rental yield with a fall in the occupancies

• An increase in debt levels may impact the company’s profitability

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