Buy Sobha; target of Rs 460: Firstcall Research

Firstcall Research's report on Sobha 

“Founded in 1995, Sobha Limited, a Rs. 25 billion company, is one of the fastest growing and foremost backward integrated real estate players in the country. It means that the company has the entire key competencies and inhouse resources to deliver a project from its conceptualization to completion. Sobha is primarily focused on residential and contractual projects. The Company’s residential projects include presidential apartments, villas, row houses, super luxury & luxury apartments and plotted developments. In all its residential projects, the company lays strong emphasis on environmental management, water harvesting and highest safety standards. On the contractual projects side, the Company has constructed a variety of structures for corporates including offices, convention centres, software development blocks, multiplex theatres, hostel facilities, guest houses, food courts, restaurants, research centres, and club houses.”

“The company net profit jumps to Rs. 601.00 million against Rs. 581.00 million in the corresponding quarter ending of previous year, an increase of 3.44%. Revenue for the quarter rose by 25.74% to Rs. 6844.00 million from Rs. 5443.00 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 6.13 a share during the quarter, registering 3.44% increased over previous year period. Profit before interest, depreciation and tax is Rs. 1565.00 million as against Rs. 1502.00 million in the corresponding period of the previous year.”

“At the current market price of Rs.412.95, the stock P/E ratio is at 16.35 x FY15E and 14.06 x FY16E Respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.25.26 and Rs.29.37 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 10% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 8.62 x for FY15E and 7.93 x for FY16E. Price to Book Value of the stock is expected to be at 1.59 x and 1.43 x respectively for FY14E and FY15E. We recommend ‘BUY’ in this particular scrip with a target price of Rs. 460.00 for Medium to Long term investment”, says Firstcall Research Report.

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