Hold Sobha Developers; target Rs 305: ICICIdirect.com
Brokerage house ICICIdirect.com has recommended hold rating on Sobha Developers with a price target of Rs 305, in its August 12, 2013 research report.
August 13, 2013 / 11:58 IST
ICICIdirect.com's report on Sobha Developers
"Sobha Developers' (Sobha) Q1FY14 results were below our expectations due to one-time items (client & labour settlement expenses) worth Rs 10 crore and higher tax rate. Sales volumes grew 10.2% YoY to 0.92 mn sq ft. In Q1FY14, the company spent Rs 47 crore on land acquisition and incurred capex of Rs 28.7 crore mainly on commercial RE, which led to a marginal rise in the net debt at Rs 1229.5 crore despite healthy operating cash flow. We maintain our HOLD recommendation on the stock as the ramp up in the construction budget, new geographies growth initiatives and investment in commercial RE may keep its FCF negative and widen its discount to its NAV.""Though Sobha's sales volume has been healthy, we anticipate that with a ramp up in the RE construction budget, the company's strategy will be to grow into new geographies while investment in commercial RE may keep its FCF negative leading to increase in debt, which may widen its discount to NAV. We maintain our HOLD rating on the stock with a target price of Rs 305/share (RE business: Rs 266/share at 0.7x its NAV and construction business: Rs 39/share," says ICICIdirect.com research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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