Buy Sobha; target of Rs 459: Axis Direct

Axis Direct's research report on Sobha

Sobha’s management expects the improved performance of Q1FY18 (pre-sales of Rs 5.6 bn; up 20% YoY) to continue for FY18. It highlighted improved footfalls and conversion. Further, it expects the collection run-rate (Rs 7.3 bn in Q1– the highest in past 13 quarters) to be sustainable. With payment of Rs 1.65 bn towards land already made to Puravankara in Q2FY18, outlook on cash flows for FY18 remains positive, and may bring the debt level down.

Outlook

We believe RERA and GST will improve transparency in the sector and lead to polarization of demand towards reputed developers such as Sobha. Moreover, with its huge land bank and strong execution capability, Sobha is best placed to capitalize on the opportunity in the affordable housing segment. Maintain BUY.