On track for a record year
Sobha (SDL) reported a robust Q2FY26 quarterly performance, validating our thesis with our ground-level assessment, which highlighted a critical inflection point in the Bengaluru real estate market. We had concluded that as investor demand wanes at these elevated prices, developers reliant on them would face headwinds, while those with a strong end-user value proposition would be resilient. SDL has not merely navigated this shift but has thrived, delivering record-breaking sales. This performance underscores a decisive “flight to quality” where SDL’s brand, synonymous with premium, well-planned communities, is capturing market share. SDL’s Q2FY26 results reflect a staggering 61.4% YoY growth, with the company having achieved sales of INR 19.03bn (ahead of our est of INR 16.5bn, -8.5% QoQ, ex of Banerghatta project launch owing to RERA approval not coming on time). Bengaluru has contributed INR 13,264mn (69.7% of overall sales), followed by NCR market, which decisively proves that demand is robust for the right type of product. The company’s ability to command an APR of INR 13,648/sft, significantly above the broader market averages we cited, demonstrates its pricing power and insulation from the peak price concerns for the generic market. The strong sustenance momentum and price-adjusted payment plans mentioned previously have effectively aided sales velocity. Consequently, while the broader Bengaluru market may see a slowdown in investor-driven projects, SDL is well-positioned to continue its growth trajectory, leveraging its brand equity to dominate the premium, end-user segment. Sobha seems to be on track with INR 100bn+ new launches in H2FY26, setting the stage for FY26 presales to cross INR 100bn. Valuation comfort, strong FCF generation, and likely robust growth are key near-term triggers for further rerating. Given the robust launch pipeline, strong balance sheet, and stable cash flows, we maintain BUY with a TP of INR 2,459/sh.
▪ Robust presales achieved: In the absence of any major new launches, SDL achieved record-breaking sales (INR 10bn is quarterly run rate) of INR 19/39.8bn for Q2FY26/H1FY26, cementing its path towards >INR 100bn for the full fiscal year. This performance was driven by sustenance sales as there was no major new launch in the quarter, due to RERA approval delay in Banerghatta project (GDV – INR10bn), which may get launched in Oct-25 now.
▪ Well-poised for growth: SDL is expected to clock INR 100bn+ in sales for FY26 (+70% YoY), supported by: 1) a strong launch pipeline in high-growth markets (Bengaluru, NCR, and Pune) and 2) brand-led pricing power and strong execution. While near-term P&L margins may be impacted by CCM accounting, improved execution ramp-up, self-owned land share, and pricing strength should enable embedded profitability in FY26. SDL remains a top pick in the southern premium housing space, with strong recall, expanding geographic footprint, and improving financial metrics This concentrated launch activity underpins the confidence in achieving H2FY26 presales of approximately INR 60bn, firmly placing SDL on track to meet its upgraded target of INR 100+ bn in FY26 presales, representing ~70% YoY growth.
