The domestic brokerage firms continued with their bullish outlook on Sobha following the company's impressive Q1FY24 earnings.
HDFC Securities reaffirmed its 'buy' rating on the stock, setting a target price of ₹935 per share, representing a substantial 67% potential increase from its recent closing price. Similarly, ICICI Securities also kept its 'buy' stance on the stock with a target price of ₹891 per share, which represents an upside of 57%.
In the past year, the stock has exhibited weak performance, declining from ₹687.75 to ₹567.80, resulting in a negative return of 17.5%.
The Bangalore-headquartered real estate and construction firm posted a consolidated net profit growth of 140% YoY to ₹12 crore in Q1FY24. Its revenue from operations jumped 63.7% YoY to ₹908 crore, as compared to ₹565 crore recorded in the corresponding quarter of last year.
The revenue from real estate grew by 66% YoY to ₹741 crore, while the revenue from contractual and manufacturing witnessed a growth of 44.12% YoY to ₹166 crore.
The company clocked Q1FY24 gross sales bookings of 1.39 million sq.ft worth ₹1,470 crore (up 28% YoY in value terms), aided by the company achieving its highest-ever gross realisation with an increased share of luxury products in the sales mix. During the quarter, the company sold 907 homes.
Bangalore contributed 54% to the overall sale value, with an improved price realisation of ₹9,483 per sq. ft. due to the product mix towards the luxury segment. The NCR region commands the highest average realisation of ₹15,296 per sq.ft amongst all the company's operating locations during the June quarter.
Overall, the average price realisation stood at the highest ever at ₹10,506 per sq. ft, up by 25% YoY and 6% QoQ, according to company's regulatory filing.
Luxury segment (> ₹2 crore) demand has seen significant improvement over the past several quarters. Sales value contribution from this segment has grown from 36% in FY23 (41% in Q4–23) to 49% in Q1FY24.
Preference for larger homes is an established trend now, due to the requirement of additional office space to cater to a hybrid model of working from office and homes. This was spotted early on and catered to by Sobha with success in Sobha City Gurgaon and Sobha Brooklyn Towers. Going forward, also, the pipeline projects are aligned to meet the same, the company said.
"The strong start to FY24 comes on the back of a solid FY23 operating performance, where the company had clocked its best-ever annual sales performance with gross sales bookings of 5.65 million sq. ft. worth ₹52 billion. As per company management, demand continues to be resilient, and the company plans to launch at least 4-5 million sq. ft. of new projects in H2FY24 (earlier guidance of 7 million sq. ft.), owing to a delay in approvals for a few launches in Bengaluru," said ICICI Securities.
The brokerage anticipates sales bookings of ₹57.8 billion in FY24E and ₹61.1 billion in FY25E.
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