Sobha delivered its very best-ever pre-sales of ~1.3msf in Q4FY21 (up 48% y-o-y, 18% q-o-q) its share in new sales at Rs 8.7 bn enhanced 59% y-o-y and 29% q-o-q fuelled by 2.8msf of launches in the quarter. Net debt edged down to ~Rs 28.5 bn (Rs 29.8 bn in Q3FY21). Mgmt indicated launches stay on track and the firm will continue to focus on money flow management.
We count on buoyancy in sales to sustain riding revival in housing demand and Sobha’s robust ~14msf launch pipeline. We continue to stick to the old AS keep Buy with revised SOTP-based TP of Rs 574 as we roll forward valuations to Sep 2022e.
Sales continue to get traction: Growth was aided by larger sales in Bengaluru (up 13% q-o-q), Gurugram (91% q-o-q) and Pune (130% q-o-q). FY21 sales at 4.0msf fell mere 1% y-o-y in spite of the lockdown in Q1FY21. Sobha launched ~2.8msf projects in Q4FY21 (2.9msf in FY21) it has a robust launch pipeline of ~14msf projects more than the next four–six quarters. It expects to launch ~7msf projects in H2CY21 and ~3msf in H1CY22.
Robust collections spur debt reduction: Aided by healthful collections (up 13% q-o-q), the firm managed to cut down its net debt q-o-q to Rs 28.5 bn in Q4FY21. Net money flow for FY21 at Rs 2.3 bn was the very best-ever in the company’s history. Management expects debt to cut down by ~Rs 1.5-2. bn in FY22 and debt:equity to attain 1.1x by H1FY23 (1.17x at finish-FY21).
Outlook: Cash flows paramount– With demand recovering and launches probably to choose up, we think Sobha’s focus on money flows will hold it in very good stead. We keep ‘BUY/SN’.