Brokerage firm Elara Capital has a 'buy' call on Sobha with a target price of ₹777 which is a 49 percent upside from the stock's May 23 closing of ₹521.10 on BSE.
Elara Capital underscored that the realty player's revenue grew 29 percent year-on-year (YoY) to ₹2,730.9 crore for FY22 while EBITDA was up 32 percent YoY at ₹889.2 crore. Net profit reported 87 percent YoY growth at ₹116.8 crore.
For Q4FY22, the company's revenue came at ₹731.3 crore, up 9 percent quarter-on-quarter (QoQ) and 32 percent YoY. EBITDA stood at ₹204.8 crore, down 10 percent QoQ and up 36 percent YoY. Net profit grew 40 percent QoQ and fell 24 percent YoY to ₹25 crore.
FY22 has proven to be an excellent year, as the company achieved its best-ever sales volume and sale value. Due to sustained demand and price rise, Sobha achieved its best-ever price realization of ₹8,265 per sqft, said Elara.
Why is Elara positive about Sobha?
The brokerage firm pointed out that for Q4FY22, Sobha reached its highest-ever quarterly cash inflow of ₹1291 crore, up 22 percent QoQ and 32 percent YoY. As a result of robust cashflow, management was able to reduce net debt by ₹317 crore, bringing down net debt ₹2337 crore. The company took an average price hike of 6 percent across its portfolio to offset the cost inflation effect.
"Given the demand environment is looking up in FY23, sales is expected to be at FY22 levels. Collection is likely to rise 20 percent and construction outflow is expected to increase by nearly 60 percent. Management has good visibility of the launch pipeline over FY23-24 with15 projects of 13.21mn sqft," said Elara Capital.
The current unsold inventory, pipeline launches and land banks, which are ready to be launched, show good operational visibility in the near to medium term. We maintained Revenue/EBITDA estimates for FY23/24, however, increased earnings by 10 percent for FY24E. Due to a 28 percent correction in the stock price since Mar 2022, we revise our rating to a 'buy' from 'accumulate' with an unchanged target price of ₹777 based on1 time one-year forward NAV," said the brokerage firm.
Disclaimer: The views and recommendations made above are those of the broking firm and not of MintGenie.
