Sobha rating – Buy: Another robust performance by company

Mgmt indicated launches stay on monitor and the corporate will proceed to give attention to money circulation administration.

Sobha delivered its best-ever pre-sales of ~1.3msf in Q4FY21 (up 48% y-o-y, 18% q-o-q); its share in new gross sales at Rs 8.7 bn improved 59% y-o-y and 29% q-o-q fuelled by 2.8msf of launches within the quarter. Internet debt edged right down to ~Rs 28.5 bn (Rs 29.8 bn in Q3FY21). Mgmt indicated launches stay on monitor and the corporate will proceed to give attention to money circulation administration.

We anticipate buoyancy in gross sales to maintain driving revival in housing demand and Sobha’s strong ~14msf launch pipeline. We proceed to comply with the outdated AS; keep Purchase with revised SOTP-based TP of Rs 574 as we roll ahead valuations to Sep 2022e.

Gross sales proceed to realize traction: Progress was aided by increased gross sales in Bengaluru (up 13% q-o-q), Gurugram (91% q-o-q) and Pune (130% q-o-q). FY21 gross sales at 4.0msf fell mere 1% y-o-y regardless of the lockdown in Q1FY21. Sobha launched ~2.8msf tasks in Q4FY21 (2.9msf in FY21); it has a strong launch pipeline of ~14msf tasks over the following 4–six quarters. It expects to launch ~7msf tasks in H2CY21 and ~3msf in H1CY22.

Sturdy collections spur debt discount: Aided by wholesome collections (up 13% q-o-q), the corporate managed to cut back its internet debt q-o-q to Rs 28.5 bn in Q4FY21. Internet money circulation for FY21 at Rs 2.3 bn was the all time within the firm’s historical past. Administration expects debt to cut back by ~Rs 1.5-2.0 bn in FY22 and debt:fairness to succeed in 1.1x by H1FY23 (1.17x at end-FY21).

Outlook: Money flows paramount– With demand recovering and launches prone to choose up, we consider Sobha’s give attention to money flows will maintain it in good stead. We keep ‘BUY/SN’.