In-line bookings; pipeline provides healthy visibility
Gurugram market drives performance
Sobha reported bookings of INR19b (6% below estimate) in 1QFY25 up 28%/ 25% YoY/QoQ. The performance was driven by the newly-launched premium project – ‘Sobha Aranya’ – in Gurugram. Overall, Sobha launched four new projects with a total area of 3msf.
Total volume for the quarter stood at 1.2msf down 15%/12% YoY/QoQ. However, aided by higher sales in Gurugram, the realizations improved 51%/41% YoY/QoQ to INR15,900/sft.
Gurugram contributed 45% (the highest ever) to the quarterly sales value with INR8.5b, surpassing Bangalore for the first time in a quarter.
In line with its strategy to accelerate monetization of the existing pipeline, Sobha has consistently scaled up its launches since 3QFY24, which led to a 9msf inventory at the ongoing projects (v/s 3.4msf in 2QFY24). The overall pipeline (incl. inventory) stood at 28msf in 1QFY25 (v/s 24msf in 4QFY24), thus providing healthy growth visibility.
Total collections were up 21% YoY to INR14b which led to 80% YoY jump in OCF to INR4b. Company increased spending on land to INR1.6b, up 4x YoY. Surplus cash flows of INR0.7b were utilized to repay debt, which decreased to INR12b or 0.5x D/E.
P&L performance – Revenue decreased 29% YoY to INR6.4b with 36% YoY decline witnessed in real estate segment’s revenue which came in at INR4.7b. Company delivered 0.9msf in 1QFY25. EBITDA declined 14% YoY to INR0.6b with margin of 9% (v/s 8% in 4QFY24). The margin in both residential and contractual segment remained subdued which impacted overall profitability. Adj. PAT stood at INR60m, down 50% YoY.
Valuation and view
Sobha continues to provide strong growth visibility by unlocking its vast land reserves. Additionally, the ongoing fund raise and strong cash flows will enable the company to focus on new land acquisitions, which will further enhance its growth pipeline.
We incorporate an updated launch pipeline and new projects acquired during the year. The ongoing and upcoming projects are likely to generate INR150b of gross cash flows and value the same at INR95b.
Sobha’s ~190msf of balance land reserve is valued at INR90b, assuming 25-75 years of monetization. The company trades at 8.5x FY25E EV/EBITDA (based on FY25E pre-sales), which is at a 15-30% discount to its comparable peers (PEPL, GPL, MLDL, and Sunteck).
We reiterate our BUY rating on the stock with an unchanged TP of INR2,250, indicating 32% upside potential.
Leave a Reply