Accumulate Sobha Developers; target of Rs 375: KRChoksey

KRChoksey is bullish on Sobha Developers and has recommended accumulate rating on the stock with a target of Rs 375 in its August 10, 2012 research report.

“Sobha Developers Ltd. (Sobha) declared its Q1FY13 results above our expectations with top-line growth of 56% y-o-y to Rs 433cr due to robust sales booking. Consequently, EBITDA income increased 82% y-o-y, primarily due to lower construction cost and staff costs while net profit spurred by 73% y-o-y to Rs 45cr, primarily due to decline in effective tax rate and carry-on effect of increase in EBITDA income. During Q1FY13, the company monetized its Pune plot worth of Rs 96cr,”

“The company sold 0.84mm sqft v/s 0.67mm sqft in Q1FY12 and 0.86mn sqft in Q4FY12. The average sales realization improved to Rs 5,737/sqft v/s Rs 5,380 /sqft q-o-q and Rs 4,547/sqft y-o-y. Total unrecognized amount of Rs.1,292cr to be reflected in the coming quarters, giving revenue visibility. EBITDA margins improved by 400bps y-o-y on the back of decline in RM cost as a % to sales, net margin improved by 100bps y-o-y, mainly due to carry-on effect of increase in EBITDA margin and lower effective tax rate, partially offset by higher interest expenses,”

"We expect the company to generate strong operating cash flow on the back of faster execution of projects, pre-sales due to improved scenario in Bangalore property market. Management is planning to launch 4.3mn sqft area during the year. Going forward, we believe significant footprint in southern India, suitable product mix and new launches with proper strategy to attract customers. In addition, timely execution of projects and positive cash flow generation would give comfort to Sobha, compared to peers in terms of project or land acquisition process. Therefore, we recommend ACCUMULATE rating on the stock with a target price of Rs 375/share (NAV method), an upside of 12%," says KRChoksey research report.

Institutional holding more than 40% in Indian cos

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