Sobha shares crumble 5% after higher costs drag Q2 net profit down

Sobha shares crumble 5% after higher costs drag Q2 net profit down

The higher expenses in the Q2 were mainly due to land purchase costs which dragged Q2 profit growth for Sobha downwards.

Revenue rose around 11 percent on year in Q2.

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Shares of Sobha Ltd tumbled 5 percent in early trade on November 7, a day after the real estate company posted a decline in its net profit for the July-September quarter.

Sobha’s net profit fell 22.4 percent on-year to Rs 14.90 crore in Q2, down from Rs 19 crore a year back, on account of a 14 percent rise in expenses, mainly due to land purchase costs which eclipsed the bottomline growth in the quarter.

The company’s operational performance too remained weak with the EBITDA margin shrinking to 10.2 percent in July-September as against 14.2 percent a year ago.

At 10.02am, the shares of Sobha were trading 3.1 percent lower at Rs 761.95 on the National Stock Exchange.

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The real estate major’s topline grew nearly 11 percent on-year to Rs 741.20 crore on the back of steady borrowing rates and resilient demand. However, this was Sobha’s lowest revenue growth in five quarters due to an absence of any major launch.

The company also stated that contribution from the luxury segment (over Rs 2 crore) increased to 48 percent in the first half of FY24 as against 26 percent in the year-ago period as demand for larger residential homes continued with work-from-home becoming a mainstay in the services sector.

For the quarter, collections also improved by 8.6 percent over the base period to Rs 1,450 crore.

The company’s debt reduction regime continued for the 12th straight quarter bringing the debt-to-equity ratio to now 0.58.

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