Buy Sobha; target of Rs 855: Motilal Oswal

Motilal Oswal is bullish on Sobha recommended buy rating on the stock with a target price of Rs 855 in its research report dated February 08, 2023.

Broker Research

February 11, 2023 / 20:20 IST

26 Aug, 2025 12:21

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Motilal Oswal's research report on Sobha

Sobha reported its best-ever sales booking of INR14.3b in 3QFY23, a jump of 36% YoY and 22% QoQ, driven by a strong response to the launch of four new towers at Sobha City, Gurugram. As a result, the contribution of Gurugram to total sales increased to 35%. For 9MFY23, pre-sales stood at INR37b, up 35% YoY. Bengaluru contributed sales of 0.9msf, slightly lower than the trailing fourquarter average of 1.0msf; hence, the contribution declined to ~50% of sales value and 60% of sales volume but in line with the company’s target. GIFT City, Tamil Nadu, Pune and Kerala reported steady contributions. Sales volume increased by 12% YoY/11% QoQ to 1.5msf. Blended realization increased by 21% YoY to INR9,600/sqft due to a favorable regional mix. Sobha’s share of sales value was up by 22% YoY/16% QoQ to INR11b. P&L performance: Revenue grew 40% YoY to INR8.7b, driven by the highestever handover of 619 units with saleable area of 1msf. However, EBITDA was affected by margin contraction in the contractual business and came in at INR0.9b, leading to margin of 10% (down 14pp YoY). PAT was down 48% YoY at INR318m, 33% below our estimate.

Outlook

That said, the current valuations imply a steep 50% discount to the book value of land, which is unwarranted. We arrive at a fair land value of INR41b (applying 20% discount to derived value) v/s INR15b of implied value. We reiterate our Buy rating on the stock with a TP of INR855, an upside potential of 48%.

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