Buy Embassy Office Parks REIT; target of Rs 478: ICICI Securities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Embassy Office Parks REIT has delivered an impressive Q2FY27 performance, with 15% YoY growth in NOI and 9% YoY growth in DPU, driven by 1.5msf of leasing during the quarter.
  • The REIT manager has retained its FY27 guidance of 13% NOI growth and 10% DPU growth, led by a mix of 2–3% occupancy growth, new asset completions, and rental escalations.
  • We believe the REIT manager's guidance is realistic and achievable, and we model for DPU to rise to INR 27.6/unit in FY27E and INR 30.3/33.0 in FY28/29E, representing a 9% DPU CAGR over FY26-29E.
  • The REIT has a healthy development pipeline of 6.2msf over FY26–30, which is expected to drive medium-term growth.

Thesis Validation Checklist

  • Investors should watch for the REIT's ability to achieve its FY27 guidance, driven by leasing momentum, occupancy growth, and rental escalations.
  • Key risks include a slowdown in office leasing and higher portfolio vacancy levels.
  • The REIT's valuation is based on a DCF approach, which captures the upside from the uptick in rental income along with the annual distribution of at least 90% of the Net Distributable Cash Flow (NDCF) to REIT unitholders.
  • The target price of INR 478 is based on 1x Mar'27E NAV, and we upgrade our rating to BUY from Add.