Sobha Share Price Plunges As Analysts Cut Target, Guidance On Weak Q3

Shares of Sobha Ltd. plunged over 6% on Monday, as the firm received target price and guidance cuts from analysts on subdued third-quarter demand and declining pre-sales.

The residential and commercial projects firm reported bookings of Rs 1,400 crore, down 29% against the same period last year, according to Motilal Oswal Financial Services Ltd. The company's share of sales stood at Rs 1,250 crore, down 28% year-on-year.

However, the brokerage noted its share in total bookings rose to 90%, due to high contributions from its 'own' projects of Sobha Neopolis and Sobha Ayana in Bangalore.

Sobha continues to provide strong growth visibility by unlocking its vast land reserves, Motilal Oswal said. "Additionally, the ongoing fundraising and strong cash flows will enable the company to focus on new land acquisitions, which will further enhance its growth pipeline."

Slower launches due to a lack of project approvals, followed by management’s comments on the reduction in fiscal 2025 guidance indicate a hit on operational estimates, it said. "Hence, we reduce our pre-sales estimates for fiscal 2025." The brokerage cut the target price to Rs 1,058 per share against Rs 2,213 apiece, implying an upside of 60% from the previous close.

The residential and commercial projects firm will fall well short of its pre-sales guidance, even as launches revive from the fourth quarter in core Bangalore, Jeffferies said in a note. The brokerage maintained 'hold' and cut the target to Rs 1,450 from Rs 1550 a piece.

Deployment of the rights issue has started, and the company is entering new markets, it said. "Net cash balance sheet and good operating cash flow performance remain key positives."

Sobha's consolidated net profit rose 44% in the third quarter of the current financial year. The construction company posted a profit of Rs 21.6 crore in the December quarter, as compared to Rs 15 crore in the same period last fiscal.

Despite the miss in fiscal 2025 estimates, Nuvama Institutional Equities expects Sobha’s sales to improve going ahead, riding the strong housing demand. Nuvama cut the target to Rs 2,100 from Rs 2,177 per share.

Sobha's share price fell as much as 6.15% intraday to Rs 1,206 apiece. The scrip was trading 5.37% lower at Rs 1,218 per share as of 1:00 p.m., compared to a 0.88% decline in the Nifty 50.

The stock has fallen 14.29% in the last 12 months and 22.89% on a year-to-date basis. Total traded volume so far in the day stood at 0.45 times its 30-day average. The relative strength index was at 43.26.

Thirteen of the 17 analysts tracking the company have a 'buy' rating on the stock, one recommends a 'hold' and three suggest 'sell', according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside of 43%.