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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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