Buy Sobha; target of Rs 750: Motilal Oswal

Motilal Oswal is bullish on Sobha recommended buy rating on the stock with a target price of Rs 750 in its research report dated May 29, 2023.

Broker Research

May 31, 2023 / 22:09 IST

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Motilal Oswal's research report on Sobha

SOBHA reported another record performance with best-ever sales booking of INR14.6b, up 32% YoY and 7% above our estimate. For FY23, pre-sales jumped 34%YoY to INR52b and ahead of its guidance of 15-20% growth. The company launched its first project at Hyderabad and contributed 10% to pre-sales. Contribution from Bengaluru sustained at over 50% and Gurugram contributed ~20% to overall sales. Sales volume increased 10% YoY to 1.5msf (flat QoQ). Blended realization achieved a record high of ~INR9,900/sqft. Sales volume for FY23 grew 15% to 5.7msf, with a 17% increase in realization to INR9,200/sqft, driven by a higher proportion of premium properties in the sales mix. In FY24, the company intends to launch 7-8msf of projects v/s 4msf in FY23 and expects to deliver 15-20% growth in pre-sales. We estimate a pre-sales of INR60b in FY24, up 15% YoY.

Outlook

That said, the current valuations imply a near zero value (INR3b) to the land bank, which is unwarranted. We arrive at a fair land value of INR26b (taken at book value) v/s INR3b of implied value. We roll-forward our estimates and also bake in marginal debt repayment thus resulting in an increased TP of INR750. We reiterate our BUY rating on the stock.

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