Motilal Oswal's research report on Sobha
Sobha reported the highest ever bookings of INR17.2b (15% beat to our estimate of INR15b), up 48%/18% YoY/QoQ. Sales volume for the quarter stood at 1.7msf, up 26%/21% YoY/QoQ. The volume from Bengaluru are now back to ~1msf run rate and its share in overall sales stood at 54% (in line with TTM average). NCR and Kerala contributed 21% and 15% in total sales. Collections increased 16% YoY to INR13b; however, on account of higher outflows, OCF declined 17% YoY to INR3b. The company delivered 0.8msf of projects in 2QFY24, leading to 22% YoY growth in the residential segment revenue to INR5.4b. Contractual revenue was down 13% YoY to INR2.3b. EBITDA declined 18% YoY and increased 15% QoQ to INR0.7b with a margin of 10.2% (vs. 13.8% in 2QFY23). The contractual business witnessed sequential improvement in margin to 15% (vs. 2% in 1QFY24).
Outlook
Management highlighted that the completion of low-margin legacy projects in the contractual segment is largely behind, and hence, we have factored in improved profitability in our valuation analysis, leading to an increase in our TP to INR960. We reiterate our BUY rating on the stock with 26% upside potential.
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