Embassy Office Parks REIT (Buy)

Target: ₹429

CMP: ₹364.25

Embassy Office Parks REIT’s (Embassy REIT) overall portfolio occupancy, as of December 2024, was 87 per cent – including infusion of 1.4 msf Splendid Techzone, Chennai asset of 1.4 msf from June 1, 2024. Driven by a combination of filling up of SEZ vacancy, office leasing momentum and pre-leased assets, we estimate portfolio occupancy of over 90 per cent by FY26E.

The REIT manager has guided for 6.5 msf of total leasing and expects 10 per cent NOI and 7 per cent DPU growth in FY25. 

We reiterate our Buy rating with an unchanged TP of ₹429 based on 1x Mar’26E NAV.  DPU growth is expected to trai lNOI growth, mainly owing to interest costs rising 15–18 per cent y-o-y, driven by full-year impact of FY24 debt refinancing and interest expense of new deliveries scheduled for FY25.

Given the strong pre-leasing momentum and gradual filling up of SEZ vacancy over the next 12–18 months, we estimate FY25E DPU of ₹22.5/unit vs. ₹21.3/unit in FY24 with a meaningful uptick in FY26E DPU to ₹26.6/unit. The REIT manager expects portfolio occupancy to rise to 88 per cent by Mar’25 vs. 87 per cent, as of Dec’24.

Key risks: Slower recovery in leasing; and higher portfolio vacancy levels.