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We maintain BUY on Sobha (SOBHA) with an unchanged TP of Rs1900, based on 8x EV/embedded EBITDA at 24% premium to NAV (the stock is trading at 7% discount to NAV). In 1QFY27, SOBHA delivered record pre-sales of Rs36.6bn (+76% yoy), aided by strong responses to its two new launches in Bengaluru and Gurugram, which together contributed ~ 79% of total pre-sales in 1QFY27. Even as reported margins stayed muted and operating cash flow moderated due to labor-related billing delays, both are expected to improve—margins to 18- 20% by 4QFY27, and operating cash flow to average ~Rs20bn/year over the next few years. Looking ahead, the company has a large launch pipeline of nine projects (~Rs120bn GDV) across key markets and guides for 30% yoy pre-sales growth in FY27 (~Rs106bn), while maintaining a net-cash-positive balance sheet. Key monitorables are launches and reported margins.

1QFY27 snapshot

Operational: In 1QFY27, SOBHA reported pre-sales of Rs36.6bn (+76% yoy), well ahead of our estimate of Rs30bn. Strong response to new launches—Sobha OneWorld in Hoskote (Bengaluru) and Sobha Crescent in Gurugram—drove this record performance, with Bengaluru and Gurugram together contributing 95% of the quarter's sales (57% and 38%, respectively). Collections and operating cashflow (OCF): In addition to strong sales bookings, SOBHA recorded healthy quarterly collections of Rs17.6bn (10% yoy). Net operating cash flow, however, moderated to Rs3.1bn (-21% yoy) in 1QFY27. Financial: Revenue of Rs12.8bn (50% yoy), EBITDA of Rs0.8bn (227% yoy), and PAT of Rs0.5bn (274% yoy). Reported EBITDA margin continues to be muted, in low single digits at 6.1% (329bps yoy). Net debt and D/E: SOBHA remains net-cash-positive at Rs6.6bn (up Rs0.3bn yoy), with gross debt of Rs11.1bn (up Rs0.9bn yoy).

Positive outlook

The company has unsold inventory of Rs192bn and a launch pipeline of Rs120bn for the remainder of the financial year, taking total available inventory to Rs312bn. With high absorption in its core markets NCR and Bengaluru even a 25% sell-through of this available inventory would translate to ~Rs78bn in pre-sales; added to the Rs36.6bn already achieved in 1QFY27, this would take full-year pre-sales to ~Rs114.6bn, comfortably surpassing the FY27 guidance of +Rs100bn, provided all planned launches materialize.

Geographic diversification

SOBHA has a well-entrenched presence in Bengaluru and Gurugram, with a growing footprint in Greater Noida, Mumbai, and Hyderabad. However, Bengaluru and NCR are expected to contribute over 60% of pre-sales over the next few years, vs over 95% in 1QFY27.

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