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HDFC Securities Institutional Equities
Sobha Ltd. has registered its highest-ever quarterly presales of Rs 17.2 billion in value terms (+48.1%/+17.7% YoY/QoQ). In terms of area, it sold 1.7 million square feet (+26.1%/+21.0% YoY/QoQ).
The average price realisation stood at Rs 10,223 per square feet (+17.4%/-2.7% YoY/QoQ). This is entirely driven by sustenance sales as there were no new launches in the quarter.
Sobha's share of sales in the mix stood at 74% as large part of sales was recorded from joint venture/joint development agreement projects.
With the new launch in Sobha Neopolis, Bengaluru, the share of Sobha in the sales mix is expected to increase.
Bengaluru contributed 59.7% to total sales, followed by NCR and Kerala at 13.5% and 15.8% respectively. NCR and Kerala have driven YoY/QoQ growth for Sobha.
Sobha is trading at the highest net asset value discount of -18% versus the long-term average of -14%. We believe that rerating will be contingent on presales outperformance, robust cash flow generation, achieving net cash status, and acceleration of new launches from captive and new land capex/tie-ups.
A robust rerating may result from the rerating equation's shrinking headwinds on the denominator and expanding tailwinds on the numerator.
We maintain 'Buy' with an net asset value-based target price of Rs 1,024/share.
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