Dec 01, 2016 01:25 PM IST IST | Source:

Hold Sobha; target of Rs 275: ICICI Direct

ICICI Direct recommended hold rating on Sobha with a target price of Rs 275 in its research report dated November 29, 2016.

ICICI Direct's research report on Sobha

The company witnessed a slowdown in sales volume with the decision making of customers getting deferred though inquiries and site visits have been happening. Though 82% of Sobha’s customers are in the salaried category, which is not going to be impacted much by the recent demonetisation move, the negative sentiment in the market would result in a deferral of buying decisions. The management believes it is a shortterm pain and volumes would be adversely impacted largely in H2FY17. Further, the management is of the view that Sobha’s sales prices will not fall significantly, going forward.

Currently, the stock is trading at attractive valuation of 0.9x FY17E P/BV and 0.5x of its NAV (after adjusting the construction business valuation). Though currently it is trading at attractive valuations, sales volume can remain under pressure post demonetisation. Hence, we continue maintain our HOLD recommendation on the stock with a revised target price of Rs 275 (RE business - Rs 241.1/share at 0.5x its NAV and construction business - Rs 33.3/share).

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