Buy Sobha, target Rs 680: Akash Jain

Akash Jain

Sobha is a reputed player in terms of management pedigree and quality of financials. The company has real estate projects in Bengaluru, Mysore,

Gurgaon, Chennai, Kochi, Thrissur, Calicut, Coimbatore and Pune. Bangalore contributes around 69 percent of overall sales volume.

The company has witnessed  new sales volume of 3.63 million square feet for the year 2017-18. Total value of the sales stood at around Rs 2,861 crore at an average price realisation of around Rs 7,892 per square feet at the close of financial year 2017-18, of which Sobha's share of sales value was at around Rs 2,422 crore, at an average  price realisation of Rs 6,680 per square feet.

For the fourth quarter (January-March), the company has achieved new sales volume of 1.02 million square feet,  which was total valued at Rs 812 crore at an average price realisation of Rs 7,993 per square feet.

The company’s annual sales volume and values were up by 21 percent and 42 percent, respectively.

Sobha's share of sales value was at Rs 656 crore, at an average price realisation of Rs 6,457 per square feet.

Quarterly sales volume and values were up by 40 percent and 31 percent respectively as compared to corresponding quarter of last year and were up by 9 percent and 7.5 percent as compared to preceding quarter

It is one of our top picks in real estate space. The company is a strong play in the affordable housing segment which has seen a strong traction recently. With RERA and GST coming into picture, we believe demand would come to towards Sobha Developers.

The company is enjoying strong cash flows and strong  track record of improving footfalls and conversion rate. The last 4 quarter results have been decent and expect the trend to continue with an upward bias.

The company’s core market, Bangalore has registered highest ever sales performance both in volume and value terms for FY18. In Q4, it had launched two projects namely, 'Sobha Forest Edge', in Bangalore and 'Sobha Gardenia', in Chennai, measuring total saleable area of 0.63 million square feet.

As far as valuation is concerned, we believe valuation of (P/BV of 1.96x) is decent and expect the price of Rs 680 plus by March 2019 considering the fact that we expect its earnings to grow by 15 percent in FY19.

Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.