Sobha Ltd - Sales bookings cross pre-COVID levels - ICICI Securities

Sobha's Q3FY21 gross sales volumes of 1.13msf worth Rs8.9bn were up 6% YoY in volume terms and 22% YoY in value terms. A strong QoQ uptick in Bengaluru and continued momentum in Kochi/Gurugram markets has enabled Sobha to cross pre-COVID sales bookings inspite of minimal launches. The company maintains its guidance of achieving a YoY growth in H2FY21 sales bookings on the back of new launches and monetisation of existing inventory. We have raised our FY21/22E volume estimates by 25% to 3.9/4.7msf respectively (earlier 3.2/3.8msf) to reflect the improved performance. We retain our BUY rating with a revised SOTP based target price of Rs505/share (earlier Rs382) as we roll forward to Mar-22 NAV and build in higher sales volumes over FY21-23E. Ability to keep debt levels in check remains the key monitorable.

- Bengaluru market drives uptick in sales bookings: Sobha's Q3FY21 gross sales bookings of 1.13msf worth Rs8.9bn were up 6% YoY in volume terms and 22% YoY in value terms. On QoQ basis, gross sales volumes and value were up 27% and 29%, respectively driven by a strong QoQ uptick in Bengaluru where volumes surged 46% QoQ to 0.79msf and contributed to 69% of the quarter's sales volumes. Sales trajectory in premium projects in Kochi and Gurugram remained strong as well. The sales volumes were achieved inspite of minimal new launches (one project of 0.12msf was launched in Bengaluru during the quarter).

- Expect improved showing in Q4FY21: The company has achieved 9MFY21 sales volumes of 2.7msf and remains confident of an improved showing in Q4FY21 as well on the back of new launches and monetisation of existing inventory. Hence, we believe that the company remains on track to clock a YoY sales booking growth in H2FY21 and we have raised our FY21/22E volume estimates by 25% to 3.9/4.7msf respectively (earlier 3.2/3.8msf) to reflect the improved performance. We believe that the relatively muted impact of COVID-19 on the IT/ITeS sector in South India in 9MFY21 has helped to a large extent along with increased sales through digital channels. 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 and pace of project approvals, especially in South India.

- Debt levels remain key: In Q2FY21, Sobha generated positive operating surplus of Rs1.3bn, which was negated by interest/tax/capex and dividend payment of Rs1.5bn leading to net debt rising by Rs0.2bn QoQ to Rs30.5bn (net D/E of 1.3x). The company's ability to keep debt levels in check remains a key monitorable.

Shares of Sobha Limited was last trading in BSE at Rs.442.15 as compared to the previous close of Rs. 410.9. The total number of shares traded during the day was 94968 in over 4361 trades.

The stock hit an intraday high of Rs. 447.95 and intraday low of 427.15. The net turnover during the day was Rs. 41353356.

Source : Equity Bulls

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