Sobha On 'Buy' List Of HSBC, Investec — Check Target Price

Two top brokerage firms have bullish views on Sobha Ltd. Both brokerages HSBC and Investec have a 'buy' recommendation on the stock. HSBC retains buy for the stock and raised target price to Rs 1,850 on roll-forward and tweaking of pre-sales estimates.

"We think Sobha has successfully resolved its debt-related issues with strong OCF generation, and now that the rights issue has been successfully completed, the company is set to grow aggressively," it said.

HSBC believes fiscal 2026 will be the much-awaited turnaround year for the company. The brokerage expects improvement in launches and a strong balance sheet to aid business development and growth.

"We raise FY26-27 e earnings by 19-27% as we incorporate Ebitda margin expansion and lower borrowing costs. We also introduce FY28 estimates. We think the current situation of the business warrants a valuation re-rating, and consequently we assign a discount of 3% to its fair valuation," the brokerage said.

HSBC's downside risks include a slowdown in the Bengaluru market, slower launches and poor capital allocation. Meanwhile, Investec's key risks include sluggish macro, weak launches and slow sales momentum.

Investec recommends a buy for the stock, with a price of Rs 1,390. The brokerage recommends a target of Rs 2,150. It forecasts a total return of 54.9%.

"Sobha's pre sales grew 22% year-on-year to Rs 18.4 billion in Q4 FY25, while it declined by 6% to 62.8 billion in FY25 vs Rs 55 billion year-on-year," it stated. "Q4 fresh sales grew by 16% year-on-year to 1.56 msf vs year-on-year. However for FY25 fresh sales decreased to 4.68 msf from 6.08 msf in FY24," it added.

"Sobha raised approximately Rs 20 billion through rights issue in FY25 which have been utilised towards debt payment, project execution and land acquisition. Accordingly, net debt was reduced substantially to Rs 6.3 billion," the brokerage said.

Shares of Sobha on Tuesday closed 5.51% higher at Rs 1,533 apiece, compared to the 0.7% decline in the benchmark Nifty 50. The scrip has fallen 18.69% in the last 12 months and 2.77% on a year-to-date basis.

Thirteen out of the 17 analysts tracking the company have a 'buy' rating on the stock, one recommend a 'hold' and three suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 17.2%.