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Operations update: a wake-up call. Sobha’s 3QFY15 sales of 0.66 mn sq. ft, the
lowest since 4QFY11. We believe the low sales were due to high product prices—85%
of the products were priced above `10 mn/unit. Debt may rise marginally versus our
assumptions of a drop during the quarter. A timely launch of Aspirational Homes in
4Q15 may boost volumes in Bangalore, but still will fall short of Sobha’s FY2015
guidance. We maintain our ADD rating and March 2016E target of `540.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
3QFY15 sales: a wake-up call for Sobha
Sobha posted sales of 0.66 mn sq. ft in 3QFY15 for a value of `4.3 bn. This was the weakest
quarter for its sales since 4QFY11, when it had project offerings in four markets compared
with eight currently. Sobha had surprisingly weak sales in Chennai (new project offered for
sale), Coimbatore, Kozhikode and Thrissur.
Bangalore was relatively strong and Sobha maintained sales volumes despite its luxury and
super-luxury portfolio. But sale volumes have remained the same (about 0.57 mn sq. ft of
average quarterly sales) since 1QFY11.
Gurgaon remains a tough market for super-luxury projects. Also, prices and product
offerings have been getting rationalized in Gurgaon. Sobha sold 1 mn sq. ft (of its share of
2.8 mn sq. ft) in Gurgaon since the launch in 2QFY12. We believe sales will remain slow for
Sobha in the medium term, until the market improves.
Recent launches have been expensive. Pune: Sobha Elanza (`9,500/sq. ft), Thrissur: Sobha
Lake Edge (`7,500/sq. ft) among others, where sales will be slow.
Aspirational Homes launch to change the mood
We believe if Aspirational Homes (channel checks suggest the project is to be named Green
Acres), is launched in early 4QFY15, Sobha will record more sales than its average quarterly
sales in Bangalore. Sobha has outlined plans to launch a high-volume project in 4QFY15 with a
starting price of under `5 mn/unit. We believe the launch will help Sobha to achieve growth in
volumes over FY2014, but it will miss its FY2015 estimates. Sobha will need to launch more
such projects from FY2017 to see a sizable increase in volumes (and hence cash flows).
What’s in store for the 3QFY15 result?
As sales have fallen more than expected, we believe debt will marginally increase in 3QFY15
(unlike our previous estimates of stable to marginal drop) as real estate collections will be flat.
But we expect debt to decline from current levels in 4QFY15 with select land monetization
monies to come in. We revise some of our ex-Bangalore sales estimates.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily08012015ax.pdf
Operations update: a wake-up call. Sobha’s 3QFY15 sales of 0.66 mn sq. ft, the
lowest since 4QFY11. We believe the low sales were due to high product prices—85%
of the products were priced above `10 mn/unit. Debt may rise marginally versus our
assumptions of a drop during the quarter. A timely launch of Aspirational Homes in
4Q15 may boost volumes in Bangalore, but still will fall short of Sobha’s FY2015
guidance. We maintain our ADD rating and March 2016E target of `540.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
3QFY15 sales: a wake-up call for Sobha
Sobha posted sales of 0.66 mn sq. ft in 3QFY15 for a value of `4.3 bn. This was the weakest
quarter for its sales since 4QFY11, when it had project offerings in four markets compared
with eight currently. Sobha had surprisingly weak sales in Chennai (new project offered for
sale), Coimbatore, Kozhikode and Thrissur.
Bangalore was relatively strong and Sobha maintained sales volumes despite its luxury and
super-luxury portfolio. But sale volumes have remained the same (about 0.57 mn sq. ft of
average quarterly sales) since 1QFY11.
Gurgaon remains a tough market for super-luxury projects. Also, prices and product
offerings have been getting rationalized in Gurgaon. Sobha sold 1 mn sq. ft (of its share of
2.8 mn sq. ft) in Gurgaon since the launch in 2QFY12. We believe sales will remain slow for
Sobha in the medium term, until the market improves.
Recent launches have been expensive. Pune: Sobha Elanza (`9,500/sq. ft), Thrissur: Sobha
Lake Edge (`7,500/sq. ft) among others, where sales will be slow.
Aspirational Homes launch to change the mood
We believe if Aspirational Homes (channel checks suggest the project is to be named Green
Acres), is launched in early 4QFY15, Sobha will record more sales than its average quarterly
sales in Bangalore. Sobha has outlined plans to launch a high-volume project in 4QFY15 with a
starting price of under `5 mn/unit. We believe the launch will help Sobha to achieve growth in
volumes over FY2014, but it will miss its FY2015 estimates. Sobha will need to launch more
such projects from FY2017 to see a sizable increase in volumes (and hence cash flows).
What’s in store for the 3QFY15 result?
As sales have fallen more than expected, we believe debt will marginally increase in 3QFY15
(unlike our previous estimates of stable to marginal drop) as real estate collections will be flat.
But we expect debt to decline from current levels in 4QFY15 with select land monetization
monies to come in. We revise some of our ex-Bangalore sales estimates.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily08012015ax.pdf
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