Sobha Ltd - Sales bookings back to pre-COVID levels - ICICI Securities

Sobha's Q2FY21 gross sales volumes of 0.89msf worth Rs6.9bn were down 14% YoY in volume terms but up 1% YoY in value terms. On QoQ basis, gross sales volumes and value were up 37% and 41%, respectively and as per the company, enquiry levels are almost at the pre-COVID levels. The exit run-rate for monthly sales volumes in August-September 2020 would be 0.30-0.35msf which is almost 90-100% of the pre-COVID monthly run rate. We have revised our FY21/22E volumes upwards to 3.2/3.8msf respectively (earlier 2.7/3.6msf) to reflect the improved performance, vs. pre-COVID annual run rate of 4msf. We retain our BUY rating with a revised SOTP based target price of Rs288/share (earlier Rs269). Ability to keep debt levels in check remains the key monitorable.

- Q2FY21 sales bookings encouraging in a tough quarter: Sobha's Q2FY21 gross sales bookings of 0.89msf worth Rs6.9bn were down 14% YoY in volume terms but up 1% YoY in value terms. On QoQ basis, gross sales volumes and value were up 37% and 41%, respectively and as per the company, enquiry levels are almost at the pre-COVID levels. Incremental sales were driven by the premium segment Marine Drive project in Kochi which clocked sales of 0.13msf during the quarter vs. usual quarterly run-rate of 0.04msf. We believe that the numbers are encouraging considering that July 2020 saw a lockdown in Bengaluru which impacted sales along with no new project launches during the quarter. Sobha's management had indicated in its Q1FY21 results call that enquiries are now almost back to pre-COVID levels and it remains optimistic of an improved sales trajectory in the remainder of FY21. The relatively muted impact of COVID-19 on the IT/ITeS sector in Bengaluru in H1FY21 has helped to a large extent along with increased sales through digital channels.

- Expect improved showing in H2FY21: The exit run-rate for monthly sales volumes in August-September 2020 would be 0.30-0.35msf which is almost 90-100% of the pre-COVID monthly run rate. We have revised our FY21/22E volumes upwards to 3.2/3.8msf respectively (earlier 2.7/3.6msf) to reflect the improved performance, vs. pre-COVID annual run rate of 4msf. While the company remains optimistic about its upcoming launch pipeline of 14.5msf, the timing and area launched for sale remains dependent on the COVID-19 containment in India in FY21E, especially in Bengaluru.

- Debt levels remain key: In Q1FY21, Sobha's net debt reduced further by Rs0.5bn but adjusted for moratorium on interest payment of Rs0.5bn, net debt levels remained flat QoQ at Rs30.2bn (net D/E of 1.2x). The company's ability to keep debt levels in check in FY21-22E remains a key monitorable.

Shares of Sobha Limited was last trading in BSE at Rs.240.25 as compared to the previous close of Rs. 227.9. The total number of shares traded during the day was 27613 in over 2337 trades.

The stock hit an intraday high of Rs. 241.15 and intraday low of 229.2. The net turnover during the day was Rs. 6497864.

Source : Equity Bulls

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