ICICIdirect.com has recommended a hold rating on Sobha Developers with a target price of Rs 467 per share in its May 23, 2014 research report.
"Sobha Developers' topline grew 6.8 percent YoY to Rs 625.4 crore (our estimate: Rs 670.1 crore) in Q4FY14. While construction & manufacturing revenues grew 51.8 percent YoY to Rs 215.8 crore, real estate revenues declined 7.3 percent YoY to Rs 410.9 crore given the lower revenue recognition during the quarter. The net profit at Rs 70.2 crore was lower than our estimate of Rs 79.4 crore mainly on account of the topline miss. The sales volume declined 14 percent YoY to 0.92 msf in Q4FY14. In terms of sales value, it declined 10.3 percent to Rs 605 crore. Going ahead, the management guided that its sales volume will grow 11.5 percent YoY to 4.0 mn sq ft in FY15E."
"Sobha's sales volume in Bengaluru has seen 64.3 percent CAGR at 2.4 mn sq ft during FY09-13 on the back of strong absorption by buoyant IT industry professionals and NRI offtake due to currency tailwind. Consequently, its overall sales volumes grew robust at 43.9 percent CAGR to 3.8 mn sq ft during FY09-13. However, Sobha's sales volumes declined 4.5 percent YoY to 3.6 mn sq ft in FY14 due to the large ticket size of unsold inventory of 7.3 mn sq ft (particularly in the NCR market where sales volumes declined 74 percent YoY to 0.1 mn sq ft). While Sobha is in the process of rejigging its project specifications into smaller units, going ahead, to keep the ticket size at much affordable levels, we have built in moderate sales volume of 3.9 mn sq ft in FY15E and 3.8 mn sq ft in FY16E."
"Currently, the stock is trading at 1.8x FY15 P/BV and 0.7x its NAV (after adjusting the construction business valuation). We maintain our HOLD recommendation on the stock with a target price of Rs 467 (RE business - Rs 417/share at 0.7x its NAV and construction business - Rs 49/share). We would like to see a ramp up in OCF & FCF before upgrading our call," says ICICIdirect.com research report.
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