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Sobha Developers
Overweight
SOBH.BO, SOBHA IN
FY11 bookings miss guidance, but higher realizations
make up for the shortfall
• 4Q results below expectations – Sobha reported 4Q net income of
Rs402M (-18% Q/Q, -28% Y/Y) below our expectation of Rs480M.
Earnings miss was primarily on account of lower than expected revenues
from RE development segment (Rs2.2B –8%Q/Q, JPMe- Rs2.5B).
EBITDA margins for 4Q stood at 19% vs. 22% in 9M due to higher
contribution from contractual & manufacturing segment (Rs1.3B in 4Q)
and no land sales in 4Q (vs. Rs1.5B of land sales in 9M). Adjusted for
land sales, 4Q revenues/PAT were largely flat Q/Q. For full year FY11,
revenues/PAT at Rs14.6B/Rs1.8B were up 30% Y/Y.
• FY11 bookings miss guidance, but higher realizations make up for
the shortfall- Mar-Q volumes remained largely stable Q/Q at
0.66msf/Rs3B thereby taking full-year FY11 bookings to
2.8msf/Rs11.3B (vs. 2.1msf in FY10). While company missed its full
year volume target and our assumption of 3msf of sales in FY11,
bookings in value terms were in line with our estimate aided by higher
price realizations (Rs4,080psf vs. ~Rs3-3.5K psf in FY10). Management
attributed the volume miss to delay in new launches due to approval
delays. For FY12, co. is guiding to 3-3.5msf of sales and further increase
in price realization (+7-10%) aided by launch in NCR. Against this, we
assume FY12 bookings of 2.8msf (flat Y/Y) at avg. price of Rs4.4Kpsf.
In terms of deliveries, co. delivered 6.3msf (RE- 4.1msf) of space in
FY11 in line with its past track record of 6-7msf of delivery p a.
• Cash flows -Company generated operational cash flows of Rs4.1B in
FY11 (including Rs1.5B from land sales). This has primarily been used
for interest payment of Rs1.8B and debt repayment of Rs2.1B. Net debt
as of end FY11 stood at Rs11.8B (FY11 net D/E – 0.6x).
• Revise down Mar-12 PT to Rs 345 (prev. Rs 420) based on 12x FY12
stabilized FCFE. This is due to the reduction in our bookings
assumptions (to 2.8msf from 3.5msf earlier) and increased construction
costs (~by 10%); however the overall impact is mitigated to some extent
by higher realizations (+8%Y/Y). For FY12/13 we assume bookings of
Rs12.3B/Rs13.6B (vs. Rs11.3B in FY10). This coupled with removal of
incremental land sales has resulted in FY12/13 EPS cut of 24%/15%
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sobha Developers
Overweight
SOBH.BO, SOBHA IN
FY11 bookings miss guidance, but higher realizations
make up for the shortfall
• 4Q results below expectations – Sobha reported 4Q net income of
Rs402M (-18% Q/Q, -28% Y/Y) below our expectation of Rs480M.
Earnings miss was primarily on account of lower than expected revenues
from RE development segment (Rs2.2B –8%Q/Q, JPMe- Rs2.5B).
EBITDA margins for 4Q stood at 19% vs. 22% in 9M due to higher
contribution from contractual & manufacturing segment (Rs1.3B in 4Q)
and no land sales in 4Q (vs. Rs1.5B of land sales in 9M). Adjusted for
land sales, 4Q revenues/PAT were largely flat Q/Q. For full year FY11,
revenues/PAT at Rs14.6B/Rs1.8B were up 30% Y/Y.
• FY11 bookings miss guidance, but higher realizations make up for
the shortfall- Mar-Q volumes remained largely stable Q/Q at
0.66msf/Rs3B thereby taking full-year FY11 bookings to
2.8msf/Rs11.3B (vs. 2.1msf in FY10). While company missed its full
year volume target and our assumption of 3msf of sales in FY11,
bookings in value terms were in line with our estimate aided by higher
price realizations (Rs4,080psf vs. ~Rs3-3.5K psf in FY10). Management
attributed the volume miss to delay in new launches due to approval
delays. For FY12, co. is guiding to 3-3.5msf of sales and further increase
in price realization (+7-10%) aided by launch in NCR. Against this, we
assume FY12 bookings of 2.8msf (flat Y/Y) at avg. price of Rs4.4Kpsf.
In terms of deliveries, co. delivered 6.3msf (RE- 4.1msf) of space in
FY11 in line with its past track record of 6-7msf of delivery p a.
• Cash flows -Company generated operational cash flows of Rs4.1B in
FY11 (including Rs1.5B from land sales). This has primarily been used
for interest payment of Rs1.8B and debt repayment of Rs2.1B. Net debt
as of end FY11 stood at Rs11.8B (FY11 net D/E – 0.6x).
• Revise down Mar-12 PT to Rs 345 (prev. Rs 420) based on 12x FY12
stabilized FCFE. This is due to the reduction in our bookings
assumptions (to 2.8msf from 3.5msf earlier) and increased construction
costs (~by 10%); however the overall impact is mitigated to some extent
by higher realizations (+8%Y/Y). For FY12/13 we assume bookings of
Rs12.3B/Rs13.6B (vs. Rs11.3B in FY10). This coupled with removal of
incremental land sales has resulted in FY12/13 EPS cut of 24%/15%
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