HDFC Securities is bullish on Sobha has recommended buy rating on the stock with a target price of Rs 652 in its research report dated May 21, 2019.
HDFC Securities' research report on Sobha
4QFY19 Revenue/ EBITDA/ APAT came in 64/35/42% higher YoY at Rs 14/2.4/1.1bn. Revenue/ APAT was higher by Rs 3.9/0.7bn on account of IND AS 115. There was a sharp recovery in pre-sales (1.1/4.0mn sqft in 4QFY19/FY19) led by higher launches (~7.4mn sqft launched in FY19). SDL expects the sales momentum to continue during FY20E. Non Bengaluru launches to grow faster than Bengaluru. SDL has tied up new land parcels in Delhi, Gurgaon and Manesar as it sees NCR as a major growth market (ex Bengaluru). SDL has ~5mn sqft of new projects in pipeline in NCR which are expected to be launched over FY20-21E. In FY20E non-Bengaluru pre-sales will be driven by Kochi, Pune, Gift City, Chennai and NCR. Pricing power remains muted and SDL is focusing on launching a mix of smaller sized apartments (<1000sqft) in its key markets. Sales momentum is stable in the Rs 10-20mn ticket size segment. GST rates have revised to 5% for
newer projects while old projects will continue at 12%. Net debt has increased by Rs 344mn QoQ to Rs 24.3bn and net D/E is now at 1.09x (vs 1.13x QoQ). SDL has guided that debt may increase marginally from current levels but net D/E will remain sub 1x levels. APMC project’s capex is expected to pick up from FY20E once all regulatory approvals are in place.
Outlook
We maintain BUY post a robust quarter. Our SOTP-based TP has increased to Rs 652 (vs Rs 646 earlier). We have increased our EPS estimate by 3/3.3% for FY20/21E.
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