Buy Sobha; target of Rs 348: HDFC Securities

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26 Aug, 2025 12:21

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HDFC Securities' research report on Sobha

SDL reported operationally weak 4QFY20 with pre-sales of 0.9mn sqft (-20% YoY) as sales in Bengaluru (73% of sales in 4QFY20) fell by 22/20% YoY/QoQ. Pre-sales for FY20 remained flattish at 4.1mn sqft. To add to weak operational performance, SDL evaluated overall portfolio and has recognized 1.93mn sqft of bookings (Rs 12.4bn value and Rs 2bn in collections, ~10% of area under construction) with low/delayed collection as probable cancellation and made it available for sales. Whilst sector as a whole is facing cancellation headwinds, SDL has disclosed same in the results. Silver lining lies in sharp recovery of presales in June near pre-Covid level. We estimate SDL to report industry leading 1QFY21 presales at 60-65% of pre covid levels and collections at ~70%+. SDL with its strong brand positioning, robust unused bank limits (Rs 15bn) and premium positioning in residential segment is well placed to ride COVID headwinds.

Outlook

We maintain BUY with reduced TP to Rs 348/sh (vs Rs 377/sh earlier) to account for higher debt.

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