Considering whether to invest in Sobha Ltd (SOBHA) shares? The Bengaluru-based real estate developer’s stock has seen significant growth, with a 3.5 times increase in just one year. This surge is largely attributed to a post-COVID boom in the sector, driven by steady demand across various segments and rising per capita purchasing power. This growth outperforms the Nifty50 index, as well as the Nifty Realty gauge, which saw a 28.7% and 136.5% rally respectively. Despite this impressive performance, many analysts remain optimistic about the long-term prospects of the realty stock.
Here are 10 key points to consider about this midcap realty stock:
1. Latest developments
In a quarterly update released on April 4, Sobha reported that FY24 was a strong year for the sector due to robust demand in the country. The company achieved its best annual sales value, new area sales, and average price realisation amidst a positive economic environment. The domestic economy’s consistency was reflected in steady GST collections throughout the year, with March 2024 recording the second-highest ever collections.
Other highlights from the update include:
- Successful launch of six residential projects in FY24
- Completion of sales for key projects like SOBHA Dream Acres and SOBHA City Gurgaon
- Launch of four new projects in Q4 with a total saleable area of 3.18 million square feet
For the December quarter, Sobha recorded its highest-ever quarterly presales in value and volume, indicating growth in both aspects compared to the previous year.
2. Analyst outlook
Analysts are positive about the stock due to its strong fundamentals, launch pipeline, and realisations. The company’s sales value increased in the final quarter, with a notable jump in price realisations.
3. Valuation
Analysts value Sobha at an EV/EBITDA multiple of 6.5 times the FY25 estimates, indicating a discount compared to comparable peers.
4. Earnings
Sobha is yet to announce the date of release for its fourth-quarter results. In the previous quarter, the company reported a consolidated net profit decline on a year-on-year basis.
5. Key triggers
Positive triggers for the realty sector include expectations of strong growth, record price realisations, a strong launch pipeline, improving cash flows, and reducing debt.
6. Risks
Risks for the company include delays in interest rate cuts, rise in inflation, economic slowdown, and geopolitical uncertainties.
7. Technical outlook
The stock’s technical outlook remains robust, with potential for further upside if key resistance levels are breached.
8. Stock vs peers
Compared to its peers, Sobha has shown strong performance and commands a higher price-to-earnings multiple.
9. Target price
Analysts have placed target prices for Sobha, with expectations of a potential upside from the current stock price.
10. Profile
Established in 1995, Sobha Ltd is a well-known real estate developer in India, with a history of strong performance since its listing in 2006.
