September 19, 2016 / 11:03 IST
Axis Direct's research report on Sobha
Sobha reported 4th consecutive quarter of positive cash flows in Q1, driven by receipt of Rs 0.4 bn from sale of its land in Pune. This helped marginally lower its net debt by Rs 0.3 bn. It expects to generate positive free cash flow in FY17 led by (1) no new land purchases and (2) no major capex. FCF is likely to be used towards lowering debt. Maintain BUY with TP of Rs 350.
Sobha reported new sales of 0.8 msf (down 4% YoY and 9% QoQ) worth Rs 5.1 bn (Sobha’s share at Rs 4.7 bn) in Q1FY17. Management maintained its sales guidance of 3.5 msf/ Rs 20 bn for FY17, driven by strong launch pipeline (of 5.6 msf) in Bangalore, Chennai, Cochin and other markets. However, we believe meeting its FY17 sales guidance is contingent on good traction in its Gurgaon project. Management highlighted that overall demand in Gurgaon continues to be tepid.
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