Motilal Oswal's reserach report on Sobha DevelopersSOBHA’s 2QFY16 presales were down 2% QoQ to INR4.9b (0.85msf). 1HFY16 cumulative presales stood at ~42% of annual guidance (19% in 1Q). Bangalore volumes were down 13% QoQ, led by slower momentum in Dream Acres; Chennai and Kerala markets posted an uptick. The stock appears attractive post corrections, which factors in operational weakness. Re-rating hinges on operational normalcy, which might take another six months to play out. Maintain Buy with a target price of INR400.Only 42% of the 4msf (INR26b) guidance has been achieved till 1HFY16. Therefore, we expect another year of operational disappointment unless the company’s Gurgaon launch springs a strong positive surprise. We estimate FY16 presales of 3.4msf (INR21.7b). The recent corrections have made the stock attractive, with operational negativity largely factored in. However, re-rating hinges on operational normalcy—which might take another six months to play out. Sobha trades at 8.9x FY17E EPS, 1x FY17E BV and EV of ~7x FY17E cash EBITDA. Maintain Buy with a target price of INR400 (25% discount to SoTP valuation of INR520)For all recommendations, click here 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.
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