Sobha shares snapped a three-day losing run to end 1.06% higher at ₹635 on BSE on October 12, a day after the company released its September quarter business updates.
On October 11, the company said it achieved the highest-ever sales value in Q2FY23 with a steady sales volume and improved on the previous best-of-average price realization. The stock, however, fell 3.19% on BSE on October 11.
“We achieved the highest ever quarterly sales value of ₹11.64 billion, a 13% increase from Q2FY22. Sobha’s share of sales value is the highest ever at ₹9.61 billion, which increased by 12.5% from Q2FY22. Average price realization improved to ₹8,709/sft, increased by 14% from Q2FY22,” the company said in a BSE filing.
Sobha said it launched three new residential projects towards the end of this quarter - two in Bangalore, and one in Thiruvananthapuram with a total saleable area of 880,893 sft.
The Q2 update of Sobha seems to have pleased brokerages as some of them see a healthy upside in the stock in the next one year.
Sobha shares are down 40% from their 52-week high of ₹1,045 that they hit on January 19, 2022, on BSE.
Brokerage firm ICICI Securities has maintained a ‘buy call on the stock with a target price of ₹808, implying a 29% upside from the stock’s October 11 closing of ₹628.35.
The brokerage is upbeat on the stock because it reported its best-ever annual sales performance in FY22.
“For FY22 overall, the company clocked its best-ever annual sales performance with gross sales bookings of 4.91msf worth ₹38.7bn,” ICICI Securities said.
“In May’22, in spite of the company having a strong launch pipeline of nearly 13msf, given the cost input inflation and mortgage rates expected in FY23E, the company had guided for flattish gross sales volume of nearly 5.0msf in FY23E (4.9msf in FY22) with gross sale value growing 5-6% to about ₹40bn ( ₹38.7bn in FY22),” the brokerage firm added.
However, ICICI Securities highlighted that given the strong Q1FY23 performance and demand sustaining even with the rise in mortgage rates, the company had revised its FY23 guidance and expects 10-15% YoY volume growth and 15-20% YoY value growth in FY23.
“Given the strong performance in the first half of FY23 in spite of rising mortgage rates, we believe that the company is well on track to achieve its FY23 guidance and we maintain our FY23E and FY24E gross sales booking value estimates of ₹45.5bn and ₹49.0bn, respectively,” said ICICI Securities.
Another brokerage firm Nuvama Wealth Management Limited (formerly Edelweiss Securities Limited) also has a buy call on the stock with a target price of ₹906- a 44% upside from the stock’s October 11 closing.
“Sobha clocked its best-ever pre-sales value in Q2FY23 despite volumes declining 2% quarter-on-quarter (QoQ) and 1% year-on-year (YoY) to 1.34msf. By value, pre-sales (company’s share) were at ₹9.6bn (up 13% YoY/1% QoQ), aided by higher realisations (up 14% YoY/3% QoQ),” Nuvama highlighted.
Nuvama underscored that RERA-driven consolidation is throwing up growth opportunities for organised players such as Sobha.
“We like the continuity in management strategy and the focus on de-leveraging. Revival in housing demand coupled with Sobha’s focus on cash flows and geographical expansion should hold it in good stead. Cash flow improvement is a key stock catalyst, in our view. We also believe that Sobha would be a key beneficiary of robust tech hiring,” said Nuvama.
However, softness in the Bengaluru market and elevated interest rate costs are the key risks.
According to a MintGenie poll, an average of 18 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.