Buy Sobha for the Target Rs 1,820 by Motilal Oswal Financial Services Ltd
Strong growth driven by higher traction in Bengaluru New launches propel robust pre-sales; luxury segment leads growth
Sobha reported 76% YoY pre-sales growth to INR36.6b in 1QFY27 (highest-ever), driven by new launches in Bengaluru and NCR. It launched three projects - Sacred Grove and P-1 of SOBHA OneWorld in Bangalore and P-1 of SOBHA Crescent in Gurgaon. For the latter two projects, it sold 40% and 60% of the launched inventory, respectively. Bangalore recorded its strongest-ever quarterly sales of INR21b, contributing 57% to total sales. NCR recorded a total sales value of INR14b, contributing 38%. The price band of >INR50m/unit outperformed with 3.2x YoY growth in 1QFY27 – Sobha Crescent, Sobha Altus, and Sobha Aranya were the key contributors. This price band accounted for 42% of the total 1Q sales value.
Strong launch pipeline; remains well on track for 30% YoY growth
The company has added two projects as a part of BD – one each in Mumbai and Greater Noida, offering GDV of INR27-30b. Of the forthcoming launch pipeline of 20.8msf (INR296b GDV) across 17 projects, 8.2msf (GDV of ~INR120b) across nine projects is expected to be launched during 2Q-4QFY27. These comprise four projects in Bengaluru (3msf), two projects in NCR (2msf, including P-2 Crescent and a Greater Noida project), one project in Hyderabad (1.7msf), and two projects in Kerala (1.5msf). It has maintained 30% YoY pre-sales growth guidance (15% implied growth during the remaining 9M of FY27). Given the strong 1Q performance, we have raised our pre-sales estimates by 7-12%, resulting in a 27% CAGR to INR130b during FY26-28E.
Collections growth moderates; NOCF declines YoY
Collections from the residential segment grew 10% YoY to INR17.6b. Since new launches were back-ended, collections from these projects were low, whereas at the ongoing projects, milestone-based collections were impacted by labor shortages during April and May, resulting in delayed billings. These are expected to be collected in 2Q. Net operational cash flow (NOCF) declined 21% YoY to INR3.1b. Sobha incurred INR3.7b towards land investment during the quarter. We expect a 21% CAGR in residential collections in FY26-28, reaching INR103b.
Contracts & Manufacturing business reports steady performance
Revenue from the Contracts & Manufacturing business grew 5.6% YoY to INR1.7b, wherein INR790m (-2.5% YoY) came in from the Contracts business and INR920b from Manufacturing & Retail. Overall collections from this division declined by 6.7% YoY to INR1.7b.
Valuation and view
* Ongoing and upcoming projects are valued at a DCF basis of INR148b.
* We reiterate our BUY rating on the stock with a TP of INR1,820, indicating a 25% upside potential.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
