Accumulate Sobha Developers; target of Rs 400: KRChoksey

KRChoksey is bullish on Sobha Developers and has recommended accumulate rating on the stock with a target of Rs 400 in its November 5, 2012 research report.

“Sobha Developers Ltd. (Sobha) declared its Q2FY13 results in-line with our expectations. Top-line grew by 41% y-o-y to Rs414cr, due to robust sales booking and strong realization. Consequently, EBITDA income increased 34% y-o-y while net profit spurred by 48% y-o-y to Rs50cr, primarily due to decline in effective tax rate and strong operating performance during the quarter.”

“The company sold 0.95mm sqft v/s 0.94mm sqft in Q2FY12 and 0.84mn sqft in Q1FY13. The average sales realization improved 7% y-o-y to Rs 5,575/sqft v/s Rs 5,188 /sqft but declined by 3% sequentially. At the end of Q2 FY13, total unbilled amount is Rs.1,472cr, which is likely to be reflected in upcoming quarters. EBITDA margins declined by 160bps y-o-y on the back of increase in construction cost as a % to sales, net margin improved by 60bps y-o-y, mainly due to lower effective tax rate & interest burden. Sobha launched two projects- Sobha Morzaria Grandeur in Bangalore and Sobha Jade in Thrissur, Kerala, totaling about 869,000 sqft. It has launched projects to the tune of 1.14mn sqft during H1FY13. Currently, it is developing about 24.54 million square feet of area across seven cities in India.”

“With the anticipation of revival in real estate market and Sobha’s significant presence in Banglore market, we believe the company to achieve sales volume of 3.78mn sqft, on account of upcoming festive seasons, strong demand of commercial market due to FDI policy in retail, improving business scenario. In addition, strong new launches and cooling down of interest rate coupled with company’s continuous effort to bring down debt burden by monetizing undeveloped land will further augur well to the company. Therefore, we continue to recommend accumulate rating on the stock with a revised target price of Rs400/share (NAV method), an upside of 8%,” says KRChoksey research report.

Bodies Corporate holding more than 50% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.

To read the full report click on the attachment

Read More