Realty group Sobha spikes 8% on record high Q1 sales; analysts see major upside

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Shares of real estate developer Sobha Limited surged about 8 percent on Thursday after the company said it achieved its highest ever quarterly sales volume during the April-June 2022 period.

The company said the total sales value was at Rs 1145 crore during the quarter, up by 67.7 percent year-on-year (YoY), selling volume at 1.36 million square feet (sq ft), up by 51.7 percent on-year.

Following the update, the stock rose 7.69 percent as of 9.30 am to Rs 629 on the BSE.

The company said its average price realisation improved to Rs. 8,431 per square feet, with price increases across ongoing projects. “Although government intervention has resulted in some commodity price reduction, the overall construction cost is still at elevated level, but showing signs of stability… We have continued our calibrated price increases in all projects and cities to counterbalance the inflationary forces,” said the company .

The firm said its Bengaluru sales volume and value was the highest ever since inception on the back of three new project launches. Cash flows also remained healthy during the quarter resulting in further net debt reduction, it added.

“Despite increase in prices, higher home loan rates, demand for our homes continues to be strong across segments, particularly in Bengaluru and Gurugram. Improved visibility of GIFT City has seen increased demand for our projects,” Sobha said.

Shares of the company have delivered 22 percent return in the last one year and 58 percent in five years, thanks to its stellar performance in recent years. Most analysts also have a buy rating on the counter with target projecting a median 40 per cent upside from current levels.

Angel Broking has a 'buy' rating on the stock with target at Rs 750.

“We expect new hiring by the IT industry will increase residential demand in the South India market. Customers are now having preference towards the branded players like Sobha. Company expected new projects/phases spread over 13.53mn sq ft across 7 cities. Majority of launches will be coming from existing land banks,” the broker said.