Sobha shares gain 9% on robust Q4 numbers, improved FY23 performance

The real estate collections were up 33% YoY at Rs 52.82 billion in FY23.

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Sobha share price rose more than 9 percent in early trade on May 30 as the company announced robust numbers for the quarter ended March 2023.

Driven by healthy topline growth Sobha has reported a massive 242 percent year-on-year growth in consolidated profit at Rs 48.6 crore for the March FY23 quarter despite a weak operating margin.

Revenue from operations surged 70.3 percent to Rs 1,210 crore compared to the corresponding period last year, with consistently higher sales, the highest-ever collections and healthy customer deliveries.

The board recommended a dividend of Rs 3 per share for FY23.

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“Financial year 2022-23 has been an excellent year for Sobha, achieving new milestones in sales and cashflow, made possible by concerted team effort and contribution from our stakeholders,” said Jagadish Nangineni, Managing Director, Sobha.

“We have a strong platform to achieve further growth, improve our offerings to our customers and maintain a healthy financial structure. Having a solid financial and operational model in place, aided by a portfolio that addresses the needs of customers, we are well-positioned to capitalize on an optimistic socio-economic environment that India presents today,” he added.

The real estate collections were up 33 percent YoY at Rs 52.82 billion in FY23 and reported the highest net cashflow of Rs 6.97 billion in FY23, up 36 percent YoY. The sales value was up 34 percent YoY to Rs 51.98 billion in FY23.

Brokerage views

Brokerage house Motilal Oswal reiterated its Buy rating on the stock. It has rolled-forward the estimates and also baked in marginal debt repayment thus resulting in an increased Target Price of Rs 750.

With higher-than-expected launches in FY24, the broking house increase its FY24/FY25 pre-sales estimate by 7/11 percent to Rs 60 billion/Rs 68 billion. On the P&L front, it maintains the revenue estimate but has reduced EBITDA by 36/24 percent for FY24/25, reflecting the margin pressure on the contracting business.

The company is progressing well on the pre-sales growth trajectory. The steady cash flow is enabling debt reduction and a renewed focus on new land investments. However, with the delay in the launch of the Hosur project and the launch at Hoskote still more than a year away, Motilal Oswal does not expect any material re-rating triggers from the land valuation perspective in the near term.

Research firm Sharekhan retains its positive view on the stock with a 25 percent upside potential.

According to Sharekhan, the company has been able to generate strong sales bookings led by new project launches and sustenance sales in existing projects. The same was also aided by improved pricing and a better geographical mix. Further, strong FCF generation has aided in the continuous reduction in net debt. However, the contractual business is expected to face margin pressure over the next few quarters.

Further, recent developments with respect attachment of land parcels and contractual business claims remain key overhangs. The stock has corrected almost 25 percent over the trailing five months led by above-mentioned issues, Sharekhan added.

At 09:18 hrs Sobha was quoting at Rs 540.85, up Rs 33.35, or 6.57 percent on the BSE.

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