IGI Logo

Embarking on expansion

Q3 sales and realization: Touching zenith backed by launches

Sobha (SOBHA IN) achieved its highest-ever sales in Q3FY24, encompassing sales value of INR 19.5bn with an area of 1.66mn sft. Sales in Bengaluru soared to a peak, with sales value of ~INR 15bn and sales volume of 1.25msf. This strong sales performance was supported by the successful launch of SOBHA Neopolis in Bengaluru, which contributed 53.9% to overall sales value. Bengaluru overall contributed ~75% to the total sales value, followed by NCR at 20.6%.

Average price realization saw sharp quarterly improvement of 15%, reaching INR 11,732 per sqft, mainly due to change in sales mix. The contribution of products exceeding INR 30mn surged from 25% in 9MFY23 to 31% in 9MFY24, supported by the launch of the third phase of luxury project, SOBHA Metropolis in Thrissur in Q3.

Navigating towards FY24 sales targets

Sobha has a forthcoming residential launch pipeline of 16.77msf, of which its share is ~81%. For Q4FY24 specifically, Sobha has a launch pipeline of seven projects, with 3msf offering convincing visibility. This robust pipeline may support Sobha in surpassing its FY24 sales guidance of 20% YoY growth on FY23 sales (~INR 52bn). In the first nine months of FY24 alone, Sobha already achieved sales of INR 51.40bn.      

Chasing next growth wave      

Sobha targets an annual sales run-rate of 10msf beyond the next few fiscal years. To achieve this, Sobha is constructing a project pipeline beyond the forthcoming launches, totaling ~20msf, mainly utilizing its existing land bank and some JV projects, giving it a stake of >90%. Additionally, Sobha plans to raise a Rights Issue to capture future growth opportunities.

Valuations: Revise to Accumulate with higher TP of INR 1,599

The current pipeline of launches, unsold inventory and landbank show good operational visibility. Although timely launches are vital, comfortable debt position offers room for new business development. Due to ~2x run-up in the stock price in the past three months, we revise Sobha to Accumulate from Buy, but with higher TP of INR 1,599 from INR 964, on 1.0x one-year forward NAV.

Please refer disclaimer at Report
SEBI Registration number is INH000000933