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ICICI Securities Report
Embassy Office Parks real estate investment trust clocked Q1 FY25 net operating income of Rs 7.7 billion (down marginally QoQ) and net distributable cash flows of Rs 5.3 billion with distribution of Rs 5.6/unit.
Overall portfolio occupancy as of June 2024 remained flat QoQ at 85%, including infusion of 1.4 msf Splendid Techzone, Chennai asset of 1.4 msf from June 1st 2024.
Driven by a combination of filling up of Special Economic Zone vacancy and pre-leased assets, we estimate portfolio occupancy of over 90% by FY26E, resulting in FY25E distribution per Unit of Rs 22.5/unit versus Rs 21.3/unit in FY24 with FY26E DPU of Rs 26.9/unit.
The REIT manager has given FY25 guidance for 5.6 msf of total leasing in FY25 and expects 10% NOI and 7% DPU growth in FY25.
We retain 'Add' with a revised target price of Rs 415/unit (earlier Rs 402) based on 1 times March 25E net asset value as we incorporate Splendid Techzone, Chennai asset acquisition.
Key risks: Slower recovery in leasing and higher portfolio vacancy levels.
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