Buy Sobha Developers; target of Rs 373: KRChoksey

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Buy Sobha Developers; target of Rs 373: KRChoksey

KRChoksey is bullish on Sobha Developers and has recommended buy rating on the stock with a target of Rs 373 in its January 25, 2011 research report.

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RELATED NEWS Accumulate Automotive Axles; tgt of Rs 490: Angel Broking Accumulate M&M Financial; tgt of Rs 778: Asit C. Mehta Buy Ashok Leyland; target of Rs 79: KRChoksey ALSO READ See previous views by KRChoksey See what other Experts & Brokerages are saying about Sobha Developer See messages about Sobha Developer Sobha Developer BSE | NSE 31/05/12 Are Mutual Funds betting on Sobha Developer?

KRChoksey is bullish on Sobha Developers and has recommended buy rating on the stock with a target of Rs 373 in its January 25, 2011 research report.

"Sobha Developers (SDL) registered revenue of Rs 362.9 crore, up 15.8% Q-o-Q and 17.3% Y-o-Y. Of the total revenues Rs 264.4 crore i.e. 73% was from the real estate segment of the company while Rs 98.5 crores i.e. 27% was from contractual and manufacturing activities. SDL sold 0.71 msf in Q3FY11 as against 0.74 msf in Q2FY11 marginally lower by 5% since the last quarter. Of the total sales in the Q3FY11 0.8 msf i.e. 80% was in Bangalore, 0.1 msf (8% of total sales) was in Thrissur, 0.1 msf (8% of total sales) in Pune and 0.03 msf (4% of total sales) in Coimbatore. Average realization for Q3FY11 was Rs 3,946 psf as against Rs 3,756 psf in Q2FY11, increase of 5% QoQ. The management indicated that there is robust demand in the residential segment and stable realization in the coming quarters."

"SDL registered EBITDA of ì 82 crores for Q3FY11 decline of 15.6% Q-o-Q and increase of 26.9% Y-o-Y. EBITDA margins remained flat at 22.6% in Q3FY11 as against 22.5% in Q2FY11. The total operating expense for Q3FY11 was Rs 280.9 crores against Rs 333.7 crores for Q2FY11; 15.8% decline QoQ, while 14.8% increase YoY. The net profit for Q3FY11 was Rs 49 crores as against Rs 58.9 crore in Q2FY11 16.8% decline QoQ; while 20.1% increase YoY. Net profit margin for Q3FY11 was 13.5% as against 13.7% in Q2FY11 i.e. 20 bps decline QoQ. An 11% decline in interest expense from Rs 10.9 crore inQ2FY11 to Rs 9.7 crore in Q3FY11, and significant other income of Rs 1.7 crore in Q3FY11 as against Rs 0.5 crore in Q2FY11 added to the bottomline of the company. The D/E ratio for the company stood at 0.67x as on December 2010 as against 0.7x as on September 2010, it aims to reduce D/E to 0.5x by March 2011."

"SDL has executed 65 real estate projects aggregating to 16.5 msf and 179 projects of 23.4 msf. It has about 28 real estate ongoing project aggregating to 8.64 msf and 36 contractual projects of 6.54 msf. Going forward the SDL is expected to develop 12 real estate projects of 11.32 msf, and 21 contractual projects of 6.94 msf. SDL is expected to launch 11.3 msf of projects in the coming quarters. Of the total new launches 6.9 msf in being launched at new geographies such as Chennai, Gurgaon, NCR and Mysore."

"SDL's strong presence in southern India, with low cost land bank offers the company flexibility in product mix. It being the only player in real estate sector to have a backward integrated business model ensures high quality products and timely execution of projects. We expect SDL to continue with its strong execution and expect launches of 11 msf in in the in next few quarters. We recommend a BUY on the stock with a revised 12 month target price of Rs 373 share, based on NAV valuation methodology, offering a potential upside of 33%," says KRChoksey research report.

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To read the full report click on the attachment