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Strong launch pipeline to drive FY24E sales bookings

Sobha Ltd. (SOBHA) achieved record Q4FY23 gross sales bookings of 1.48msf worth Rs14.6bn (up 32% YoY in value terms) aided by the company achieving its highest ever gross realisation of Rs9,898/psf. For FY23 overall, the company had clocked its best-ever annual sales performance with gross sales bookings of 5.65msf worth Rs52.0bn. The company plans to launch 7-8msf of new projects in FY24E of which 5msf is expected to be in Bengaluru, 1msf in Gurugram and balance in other cities. If the approvals for all the planned launches come through, then the company is targeting 15-20% growth in gross sales bookings for FY24 (we model for sales bookings of Rs57.8bn in FY24E and Rs61.1bn in FY25E). Another key positive in FY23 was the company’s net debt levels reducing by Rs7.0bn to Rs16.4bn (net D/E of 0.66x). We maintain our BUY rating with a revised SOTP based TP of Rs891/share (earlier Rs808) factoring in higher consolidated net debt reduction and higher launch volumes and realisations across projects. Key risks are demand slowdown and rise in debt levels.

* Bengaluru market sales drive strong operational performance: Sobha clocked record Q4FY23 gross sales bookings of 1.48msf worth Rs14.6bn (up 32% YoY in value terms) aided by the company achieving its highest ever gross realisation of Rs9,898/psf. During the quarter, the company launched its first project in Hyderabad “Sobha Waterfront” while the Bengaluru market clocking 0.93msf or 63% of the quarter’s volumes compared with the historical trend of over 70% volume contribution. For FY23 overall, the company had clocked its best-ever annual sales performance with gross sales bookings of 5.65msf worth Rs52.0bn.

* On track to achieve 15-20% FY24E sales booking growth: As per company management, demand continues to resilient and the company plans to launch 7-8msf of new projects in FY24, of which 5msf is expected to be in Bengaluru, 1msf in Gurugram and balance in other cities. If the approvals for all the planned launches come through, then the company is targeting 15-20% growth in gross sales bookings for FY24 (we model for sales bookings of Rs57.8bn in FY24E and Rs61.1bn in FY25E). While EBITDA margins for FY23 of 11% have been impacted by legacy contracting and manufacturing segment projects, the company expects margins to improve from H2FY24. While consolidated net debt levels have reduced by Rs7.0bn in FY23 to Rs16.4bn, company expects pace of debt reduction to be slower going ahead given Rs3-4bn of annual and spend and increased construction spend going ahead.

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