Sobha Shares Gain On Better Sales, Bullish Analyst Ratings

Shares of Sobha Ltd. gained the most in more than two months as analysts stayed bullish on the real estate developer, citing improved sales performance even as the more contagious second wave of Covid-19 infections raged.

The Bengaluru-based company reported gross sales booking of 0.90 million square feet in the quarter ended June, according to its business update released on the bourses.

• It achieved total sales volume of 895,539 square feet of super built-up area valued at Rs 683 crore.

• Bengaluru sales volume have grown 37% over the year-ago period despite stringent impact of Covid second wave during the reported quarter.

• The company has planned new launches of 13.35 million square feet.

Sobha expects normalcy to return in the second half of FY2021-22 as economic activities have resumed. “We, however, cannot completely rule out uncertainties and likely impact caused by second wave of the pandemic,” it said in the filing. “We are also unsure about how and when the third wave will strike and with what consequences.” But the company is confident of withstanding any impact with resilience and aims to keep improving its market share in the residential space.

Shares of Sobha gained as much as 9%, the most since April 20, 2021. The stock, however, pared some of the gains to trade 4.7% higher around 2 p.m. on Wednesday. Of the 19 analysts tracking the stock, 18 recommend a ‘buy' and one suggests a ‘hold', according to Bloomberg data. The average of the 12-month consensus price targets implies an upside of 2.8%.

Brokerages On Sobha

ICICI Securities

• Expects improved performance to continue in FY22-23E.

• Relatively muted impact of Covid-19 on IT/ITeS sector in south India aided sales.

• Reduction of debt levels crucial to sustain momentum.

• Maintains ‘add' with a target price of Rs 540 per share.

Jefferies

• Good performance in Q1FY22 considering the tough second wave.

• Q4FY21 was a record high for Sobha in both value and volume terms.

• Second wave had hit the home market of Bengaluru hard.

• Key non-Bengaluru markets broadly maintained sales trajectory.

• New launches important to maintain traction.

• Maintains ‘buy' with a target price of Rs 592 per share.

Edelweiss

• Relatively good performance despite Covid-19 induced lockdown.

• New launches, cash flows, debt remain key variables in driving growth.

• Focus on cash flows, geographic expansion augurs well.

• Maintains ‘buy' with a sum-of-the-parts-based target price of Rs 574.

Kotak Institutional Equities

• Commendable sales performance in light of the disruption due to the second wave.

• Dominance of Bengaluru has increased to 74% in Q1FY22.

• Sales volume in non-Bengaluru markets on the rise.

• Maintains ‘buy' with unchanged fair value of Rs 520 apiece.