Sobha Developers - Aspirational Homes to Boost Volumes; Result Update Q2FY15 :: Edelweiss, PDF link

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Sobha Developers (Sobha) reported marginally higher revenues and lower EBITDA margin for the quarter. EBITDA margin at 25% (versus our 27% estimate) impacted by input cost pressures was a disappointment.  Operations remained stable with sales of 0.8msf for INR5,590mn for the quarter as against 0.75msf for INR4,822mn in Q1FY15. While the company maintains its 4msf guidance, we estimate sales of 3.8msf for INR24bn for the year. The company will soon launch its first project across 7.6msf (Sobha’s share 6.2msf) under the ‘Aspirational Homes’ segment in H2FY15, which is expected to boost volumes going forward.

Margin miss; operations steady

Sobha reported revenues of INR6,722mn, marginally higher than our estimate of INR5,987mn. However, EBITDA margin at 25% (versus our 27% estimate) was a disappointment.  The company highlighted input cost pressures and no increase in average realisations as reasons for the same. Operations remained stable with sales of 0.8msf for INR5,590mn as against 0.75msf for INR4,822mn in Q1FY15. While Sobha maintains its 4msf guidance, we estimate sales of 3.8msf for INR24bn for the year.

‘Aspirational Homes’ to provide volume push

The company will launch its first project under the ‘Aspirational Homes’ segment in H2FY15, which is targeting considerably lower-ticket size with 1BHK and 2BHK configurations. The project is a significant one, spread across 81 acres and saleable area of 7.6msf (Sobha’s share 6.2msf). The project will be launched in phases and we expect it to lend fillip to the company’s volumes in coming years. We see this project as a positive given that this marks Sobha’s foray into a new segment which can be potentially much larger and allowing effective utilization of the company’s strong ~2,600 acre land bank.

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https://www.edelweiss.in/research/Sobha-Developers--Aspirational-Homes-to-Boost-Volumes;-Result-Update-Q2FY15/27552.html