Elara Capital
Sobha (Buy)
CMP: ₹454.40
Target: ₹600
Sobha revenue grew by 2 per cent y-o-y to ₹660 crore versus our estimates of ₹630 crore. Growth was primarily driven by strong contractual revenue of 78 per cent y-o-y to ₹270 crore. Operationally, pre-sales was up 4 per cent y-o-y and 1 per cent q-o-q to ₹620 crore (Sobha’s share), aided by good response for new launches and stable demand in the Bengaluru market. Cash collections were steady, up 3 per cent q-o-q, to ₹760 crore. EBITDA grew by 12 per cent y-o-y to ₹140 crore, broadly in line with our estimates. Other income came in higher at ₹17.5 crore. Further, the tax rate came in at 31 per cent. As a result, reported PAT was up 22 per cent y-o-y at ₹61.4 crore. Net debt increased by ₹100 crore to ₹2,370 crore.
The implementation of RERA is aiding in sales for organised developers. Sobha’s pre-sales run-rate and cash collections have been steady for several quarters, and they are expected to pick up, aided by new launches and resilient demand in markets where the company operates. Its strong brand presence in the market, execution track record and sales momentum provide comfort on sustainable growth.
We reiterate our ‘Buy’ rating, with TP of ₹600 based on a one-year forward NAV. Faster monetisation of its legacy land bank will be key thing to monitor.