Shares of Sobha witnessed a gain of 10% to ₹558 apiece during Tuesday's intra-day trade after declining steadily for the last four trading sessions. This strong pullback came after the company posted a robust set of numbers for the March quarter.
The Bangalore-headquartered real estate and construction firm posted a consolidated net profit growth of 250% YoY to ₹49 crore. Its revenue from operations jumped 70.42% YoY in Q4 to ₹1,210 crore, as compared to ₹710 crore recorded in the corresponding quarter of last year.
Brokerage firm Motilal Oswal said that the company reported another record performance with the best-ever sales booking of ₹14.6 billion, up 32% YoY. For FY23, pre-sales jumped 34% YoY to ₹52 billion.
The company launched its first project in Hyderabad and it contributed 10% to pre-sales. The contribution from Bengaluru was sustained at over 50%, and Gurugram contributed 20% to overall sales, said the brokerage firm.
The brokerage said the company's sales volume increased 10% YoY in Q4 to 1.5 msf (flat QoQ). Blended realisation achieved a record high of ₹9,900 per sq.ft, it noted.
Overall sales volume for FY23 grew 15% to 5.7 msf, with a 17% increase in realization to ₹9,200/sq.ft, driven by a higher proportion of premium properties in the sales mix, it added.
In FY24, the company intends to launch 7-8 msf of projects as compared to 4 msf in FY23 and expects to deliver 15-20% growth in pre-sales.
With higher-than-expected launches in FY24, the brokerage has raised its FY24/FY25 pre-sales estimate by 7% and 11% to ₹60 billion and ₹68 billion, respectively.
On the P&L front, the brokerage maintains its revenue estimate but has reduced EBITDA by 36%/24% for FY24/25, reflecting the margin pressure on the contracting business.
"SOBHA is progressing well on the pre-sales growth trajectory. The steady cash flow is enabling debt reduction and a renewed focus on new land investments. However, with the delay in the launch of the Hosur project and the launch at Hoskote still more than a year away, we do not expect any material re-rating triggers from the land valuation perspective in the near term," said Motilal Oswal.
"The current valuations imply a near-zero value ( ₹3 billion) to the land bank, which is unwarranted. We arrive at a fair land value of ₹26 billion (taken at book value) vs. ₹3 billion of implied value," the brokerage added.
Motilal Oswal has revised its estimates and factored in marginal debt repayment, resulting in an increased target price of ₹750 apiece, maintaining a 'buy' rating.
Likewise, Kotak Institutional Equities also retained its 'buy' rating on the stock with a target price of ₹700 apiece.
“Sobha has seen a significant reduction in net debt, owing to strong operational cash flow generation. The pre-sales profile has improved significantly and has nearly doubled from the quarterly run-rate in FY2020. However, clarity on the ongoing regulatory hurdles is paramount for stock performance,” said the brokerage firm.
17 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
