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Sobha Developers (SOBH.BO)
Buy Equity Research
Below expectations: Lower land sales; debt reduction in line
What surprised us
Sobha reported FY2011 revenues of Rs14,643 mn (vs. our expectation of
Rs15,154 mn) and PAT of Rs1.83 bn (vs. our expectation of Rs1.98 bn).
Lower revenues were primarily due to lower land sales. Sobha broadly
met guidance provided at the start of FY2011: (1) volume of 2.8 mn sq. ft.
vs. guidance of 3 mn sq. ft.; (2) gross debt reduction of Rs2.4 bn resulting
in debt/equity of 0.65X; (3) contractual revenues increased to Rs4 bn,
registering a yoy growth of 34%; and (4) having adequate lines of credit of
Rs8 bn against upcoming debt payments of Rs5.5 bn in FY2012E. Sobha
raised its dividend to Rs3/share (around 16% of FY11 PAT) vs. Rs2.5/share
for FY10. However, management gave volume guidance of 3.5 mn sq. ft.
for FY12E despite (1) adding three new markets in FY12E (Chennai,
Gurgaon, and Mysore); (2) large launch pipeline of 11 mn sq. ft. and
unsold stock of 3.04 mn sq. ft.; and (3) better balance sheet indicating
higher ability to invest for accelerating launches.
What to do with the stock
We retain our Buy rating (on CL) for Sobha and cut our 12-month RNAV-based
target price to Rs340 (from Rs344) to reflect a slight delay in project execution.
Sobha is trading at 26% discount to our FY12E RNAV of Rs377. We adjust our
FY12E volumes to 3.7 mn sq. ft. (from 4 mn sq. ft.). We lower our FY12/FY13E
land sales, and consequently, our EPS are revised by -7%. We also introduce
FY14E EPS. Key catalysts for the stock are upcoming launches in Gurgaon,
Bangalore, Mysore, and Chennai over the June-July period. Key risks are
lower-than-expected volumes
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sobha Developers (SOBH.BO)
Buy Equity Research
Below expectations: Lower land sales; debt reduction in line
What surprised us
Sobha reported FY2011 revenues of Rs14,643 mn (vs. our expectation of
Rs15,154 mn) and PAT of Rs1.83 bn (vs. our expectation of Rs1.98 bn).
Lower revenues were primarily due to lower land sales. Sobha broadly
met guidance provided at the start of FY2011: (1) volume of 2.8 mn sq. ft.
vs. guidance of 3 mn sq. ft.; (2) gross debt reduction of Rs2.4 bn resulting
in debt/equity of 0.65X; (3) contractual revenues increased to Rs4 bn,
registering a yoy growth of 34%; and (4) having adequate lines of credit of
Rs8 bn against upcoming debt payments of Rs5.5 bn in FY2012E. Sobha
raised its dividend to Rs3/share (around 16% of FY11 PAT) vs. Rs2.5/share
for FY10. However, management gave volume guidance of 3.5 mn sq. ft.
for FY12E despite (1) adding three new markets in FY12E (Chennai,
Gurgaon, and Mysore); (2) large launch pipeline of 11 mn sq. ft. and
unsold stock of 3.04 mn sq. ft.; and (3) better balance sheet indicating
higher ability to invest for accelerating launches.
What to do with the stock
We retain our Buy rating (on CL) for Sobha and cut our 12-month RNAV-based
target price to Rs340 (from Rs344) to reflect a slight delay in project execution.
Sobha is trading at 26% discount to our FY12E RNAV of Rs377. We adjust our
FY12E volumes to 3.7 mn sq. ft. (from 4 mn sq. ft.). We lower our FY12/FY13E
land sales, and consequently, our EPS are revised by -7%. We also introduce
FY14E EPS. Key catalysts for the stock are upcoming launches in Gurgaon,
Bangalore, Mysore, and Chennai over the June-July period. Key risks are
lower-than-expected volumes
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