Motilal Oswal's research report on Sobha
SOBHA reported the highest ever pre-sales of INR14.65b (11% above our estimate), which was up 28% YoY and flat QoQ, despite seasonality. A large part of this growth was attributed to improved pricing, as sales volume remained relatively stable YoY at 1.4msf (down 6% QoQ). However, the blended realization witnessed a 25% YoY increase, driven by greater contributions from markets with higher realizations such as NCR, Kerala, and Hyderabad. Additionally, there were price hikes in Bengaluru (up 17% YoY) and Gurugram (up 40% YoY). Bengaluru contributed to 60% of total volumes, while NCR and Kerala contributed 15% each. No new projects were launched during the quarter, but the company released 0.8msf of area in ongoing projects of Marina One, Kochi and Sobha Metropolis, Thrissur. SOBHA raised its new project launch pipeline to 15msf from ~13msf in 4QFY23, of which, it plans to launch ~7-8msf in FY24, which will drive presales growth. We expect the company to clock pre-sales of INR60b in FY24, up 15% YoY and in line with the company guidance of 15-20% growth.
Outlook
That said, the current valuations imply INR15b of value to the land bank, which is at a steep discount to book value of INR26b. We arrive at a fair land value of INR29b, based on discounted cash flows and applying a 50% discount for the uncertainty. We reiterate our BUY rating on the stock with unchanged TP of INR750.
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