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Sobha Developers Overweight
SOBH.BO, SOBHA IN
1Q FY12 disappoints on lower RE revenue
recognition; net debt increases Q/Q
Sobha reported 1Q FY12 earnings of Rs309MM, below our and street
expectations (JPMe Rs408MM) on lower revenue recognition from the RE
segment and higher-than-expected interest expenses. Net debt of Rs13B
increased by Rs1.1B during the Q. On the operational front, 1Q pre-sales
(Rs3B, stable Q/Q) run rate was in line with our full year estimate, but is
tracking below Sobha’s FY12 guidance of Rs15B. While launches have
picked up over the past two months and the response to new projects has
been encouraging, Sobha’s FY12 presales growth target of 30% Y/Y
appears optimistic given the current weak macro environment.
Financial highlights: 1) 1Q RE revenues at Rs1.95B (-12% Y/Y, -10%
Q/Q) are lagging behind company’s bookings run rate of Rs3B/ quarter.
Sobha expects recognition to pick up from 3Q FY12 onwards once new
projects reach revenue recognition threshold. 2) EBITDA margins stood
at 20% (+100bp Q/Q, flat Y/Y) due to the high contribution from the
contractual segment (40% of sales). 3) Net debt increased by Rs1.1B
during Jun-Q due to the payment of ~Rs1B for govt. charges for new
launches (EDC/IDC for Gurgaon project) and the PE stake buyout
(~Rs500M). 4) Tax rate increased to 32% in Jun-Q (vs. FY11 – 25%).
Operational highlights: 1) 1Q new bookings were largely flat Q/Q at
Rs3B (0.67msf). Average realizations at Rs4,547psf were up 11% vs.
FY11 levels and are expected to improve further on the back of recent
Gurgaon launch (>Rs8.1K psf). 2) New launches have picked up at the
margin with 3.5msf launched in Jun-Q and the Gurgaon project being
launched in July (20 units sold). The response to these projects has been
encouraging, according to management. 3) 1Q delivery was 0.54msf (RE
0.3msf). Full year delivery target stands at 4.8msf (RE - 2msf); 4] O/S
contractual order book stands at Rs7.5B as of Jun-Q. This provides
decent visibility on contractual revenue target of Rs5B for FY12.
Estimate changes: We revise down our FY12/13 estimates by 15%/17%
as we factor in higher interest & tax expense and marginally lower our
margin assumptions. For FY12, we assume bookings of Rs12.3B (+9%
Y/Y) vs. co guidance of Rs15B. Correspondingly our Mar-12 PT based
on 10x stabilized FCFE (in line with other mid cap players) is revised
down to Rs290.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sobha Developers Overweight
SOBH.BO, SOBHA IN
1Q FY12 disappoints on lower RE revenue
recognition; net debt increases Q/Q
Sobha reported 1Q FY12 earnings of Rs309MM, below our and street
expectations (JPMe Rs408MM) on lower revenue recognition from the RE
segment and higher-than-expected interest expenses. Net debt of Rs13B
increased by Rs1.1B during the Q. On the operational front, 1Q pre-sales
(Rs3B, stable Q/Q) run rate was in line with our full year estimate, but is
tracking below Sobha’s FY12 guidance of Rs15B. While launches have
picked up over the past two months and the response to new projects has
been encouraging, Sobha’s FY12 presales growth target of 30% Y/Y
appears optimistic given the current weak macro environment.
Financial highlights: 1) 1Q RE revenues at Rs1.95B (-12% Y/Y, -10%
Q/Q) are lagging behind company’s bookings run rate of Rs3B/ quarter.
Sobha expects recognition to pick up from 3Q FY12 onwards once new
projects reach revenue recognition threshold. 2) EBITDA margins stood
at 20% (+100bp Q/Q, flat Y/Y) due to the high contribution from the
contractual segment (40% of sales). 3) Net debt increased by Rs1.1B
during Jun-Q due to the payment of ~Rs1B for govt. charges for new
launches (EDC/IDC for Gurgaon project) and the PE stake buyout
(~Rs500M). 4) Tax rate increased to 32% in Jun-Q (vs. FY11 – 25%).
Operational highlights: 1) 1Q new bookings were largely flat Q/Q at
Rs3B (0.67msf). Average realizations at Rs4,547psf were up 11% vs.
FY11 levels and are expected to improve further on the back of recent
Gurgaon launch (>Rs8.1K psf). 2) New launches have picked up at the
margin with 3.5msf launched in Jun-Q and the Gurgaon project being
launched in July (20 units sold). The response to these projects has been
encouraging, according to management. 3) 1Q delivery was 0.54msf (RE
0.3msf). Full year delivery target stands at 4.8msf (RE - 2msf); 4] O/S
contractual order book stands at Rs7.5B as of Jun-Q. This provides
decent visibility on contractual revenue target of Rs5B for FY12.
Estimate changes: We revise down our FY12/13 estimates by 15%/17%
as we factor in higher interest & tax expense and marginally lower our
margin assumptions. For FY12, we assume bookings of Rs12.3B (+9%
Y/Y) vs. co guidance of Rs15B. Correspondingly our Mar-12 PT based
on 10x stabilized FCFE (in line with other mid cap players) is revised
down to Rs290.
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