Buy Sobha Ltd for the Target Rs 1,900 by Emkay Global Financial Services Ltd
We recently met with SOBHA’s management. Bengaluru continues to see strong real estate absorption. SOBHA has also witnessed strong response to its recent launch, Sobha One World in Hoskote, Bengaluru, along with steady sales momentum across its Bengaluru projects. During this quarter, SOBHA launched two major projects—Sobha Crescent in Gurugram and Sobha One World in Hoskote, Bengaluru. Both projects received healthy response and we expect them to contribute aggregate pre-sales of over Rs25bn in 1QFY27. We also expect these projects to contribute meaningfully for the remainder of the year. Together, they account for 6.2 msf of the company’s planned FY27 launches of 10 msf. In addition, the company has a launch pipeline of ~ 4 msf in Kerala and Bengaluru, expected in 2HFY27. Overall, SOBHA’s pre-sales is likely to surpass Rs30bn in 1QFY27. On the back of healthy launch responses and continued real estate demand in Greater Noida and Bengaluru, we expect SOBHA to comfortably surpass its FY27 pre-sales guidance of Rs100bn. We maintain BUY and TP of Rs1,900, based on 8x EV/embedded EBITDA, at 21% premium to NAV (the stock currently trades at a 9% discount to NAV).
Strong growth aspirations
Over the past five years, SOBHA’s pre-sales delivered 21% CAGR, increasing from Rs31.4bn in FY21 to Rs81.4bn in FY26, marking its highest-ever pre-sales performance. The company remains ambitious, with FY27 pre-sales guidance of +Rs100bn (30% YoY growth) and a target of +Rs200bn by FY31. The management expects Bengaluru and NCR to remain its key growth markets, together contributing ~60% of pre-sales over the next five years. While Hyderabad, Mumbai, and Pune remain important markets, the company indicated that its Mumbai operations are still in the learning phase.
Real estate demand
The management expects residential demand to remain healthy, supported by organic end-user demand and long-term urbanization trends. The management acknowledged uncertainty around AI's impact on employment, particularly for entry-level jobs, but noted that demand from higher-skilled and higher-income professionals, its core customer base, remains resilient. Although rising supply across several markets is likely to limit price appreciation, the company expects volume-led growth and continues to focus on margins and cash flow.
Business development
The management remains disciplined on capital allocation and business development, with no urgency to acquire land given its existing project pipeline for the next 2–3 years. It intends to pursue acquisitions only when attractive opportunities arise and is comfortable taking incremental debt for the right investments, while maintaining a prudent approach to leverage and cash deployment.
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