Sobha Developers - Growth led by core market performance - JM Financial

Fresh sales of Rs. 6.32bn (+20%YoY/+5%QoQ) in a seasonally weak 2Q is commendable from Sobha Developers led by strong performance in core Bangalore market. 6MFY14 performance marks 48% achievement of FY14 guidance; 1H usually accounts for 45-47% of the full year sales (based on FY11-13 performance). Overall sales volume of 1mn sq ft grew 9%QoQ/6%YoY. Bangalore market volumes grew 12%QoQ/14%YoY, contributing 67% to total sales volumes which resulted in strong 2Q performance. Recommend BUY.

- 1Q fresh sales Rs. 6.32bn at average realisation of Rs. 6,304/sq ft: Sobha clocked fresh sales of Rs. 6.32bn – up 20% vs last year. Growth was led by 13% realisation and 6% volume growth. 1HFY14 sales of Rs. 12.35bn marks 48% achievement of full year guidance (ahead of history, 1H is usually 45-47% of full year sales).

- Entry in new geography Kozhikode: Sobha launched 2 new projects during the quarter, one each in Bangalore (0.55mn sq ft) and Kozhikode (0.58mn sq ft). Kozhikode project is c.10% sold as on date and marks Sobha's entry into this southern micro-market. Total launches during the quarter were at 1.13mn sq ft vs 0.56mn sq ft in 1QFY14.

- Bangalore volumes grew 12%QoQ/14%YoY: Bangalore sales of 0.67mn sq ft grew 12%QoQ/14%YoY. Bangalore contributes 67% to total sales volumes (1QFY14:66%, 2QFY13:62%). New locations contributed 20% to 2Q volumes despite significant drop in NCR sales.

- Recommend BUY with Mar'14 target price of Rs. 430: We continue to like Sobha Developers for its sustained superior operating performance, quality management and strong fundamentals. Recommend BUY with Mar'14 target price of Rs. 430.

Source : Equity Bulls

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