Sobha clocked very best-ever pre-sales in Q4FY21, fuelled by robust demand across segments. Volumes surged to 1.3msf (up 18% QoQ and 48% YoY) by worth, sales (company’s share) had been at Rs 8.7billion (up 29% QoQ and 58% YoY) aided by larger realisation (up 5% YoY). FY21 sales volume at ~4msf was flat YoY, although sales worth (company’s share) was up 4% YoY in spite of the lockdown. The business launched projects spanning ~3.0msf for the duration of the quarter (~3.2msf in FY21). With housing demand bouncing back sharply, we count on the sales momentum to stay powerful in the close to term. Maintain ‘buy’ with revised SOTP-based target price tag of Rs 572 (Rs 555 earlier).
Sales momentum gathers traction: Bengaluru contributed 67%. New sales volume grew across most cities sales in Bengaluru recovered 13% QoQ and contributed 67% to general sales. Other cities that reported powerful QoQ development involve Gurugram (91% QoQ), Pune (130% QoQ) and Kochi (268% QoQ). Bengaluru, Gurugram and Kochi cumulatively accounted for 88% of sales for the duration of the quarter. Bengaluru contributed ~67% to FY21 sales volumes except Bengaluru, total contribution of other regions to sales for the duration of FY21 was the highest eve.
Price realisation rises 5% YoY: Average price tag realisation for the duration of Q4FY21 jumped 5% YoY (2% QoQ) to ~`8,000/sft — highest in the previous eight quarters. This was partly due to adjust in solution mix and partly due to price tag hikes taken by the business in particular projects. Realisations for the duration of FY21 jumped 10% YoY on typical.
New launches, money flows and debt stay important monitorables: Sobha launched 3 housing projects spanning 2.77msf and .27msf of industrial space for the duration of the quarter. It expects launch activity to stay healthier going ahead. The company’s concentrate on money flow management has helped it lessen net debt for the duration of the quarter. Outlook and valuations: Balance sheet important preserve ‘buy’. As highlighted in our complete sector report, Real Estate – The Charge of the Consolidating Brigade, RERA-driven consolidation is throwing up development possibilities for organised players such as Sobha.
We like Sobha’s powerful presence in the South India realty market place and robust execution capabilities. Revival in housing demand (refer to, Hot Property – Rising like a phoenix), Sobha’s concentrate on money flows and geographical expansion really should hold it in fantastic stead. Cash flow improvement is a important stock catalyst, in our view. We preserve ‘BUY/SN’ with revised SOTP-based target price tag of INR572/share although rolling forward the valuation to September 2022E. We derive the TP by applying 10% discount to its NAV of INR589/share for the residential small business plus worth of the contractual small business.