In its research report dated October 5, 2023, HDFC Securities expresses a bullish sentiment towards Sobha Limited (SDL) and recommends a buy rating on the stock with a target price of Rs 1024.
The report highlights the company’s strategic focus on resetting, restarting, and refocusing its operations, which has resulted in a rerating of the stock. SDL has prioritized deleveraging, securing new business development opportunities, and increasing new project launches. Notably, the company has a new launch pipeline of 15 million square feet (msf) and 20 msf in advanced stage tie-ups.
The operational data for Q2FY24 reinforces this positive outlook. Sobha reported record-high presales of INR 17.2 billion, reflecting a 48.1% year-on-year increase and a 17.7% increase sequentially. In terms of area, the company sold 1.7 msf, marking a 26.1% year-on-year increase and a 21.0% increase sequentially. The average price realization stood at INR 10,223 per square foot, reflecting a 17.4% year-on-year increase, despite a slight decline of 2.7% sequentially.
The report emphasizes that Sobha is well-positioned for rerating due to valuation comfort, robust free cash flow generation, and potential deleveraging. Consequently, HDFC Securities maintains a buy rating on Sobha with a target price based on its net asset value (NAV) at INR 1024 per share.
Investors are encouraged to consider this research report when assessing the investment potential of Sobha Limited. The report underscores the company’s positive momentum and strategic initiatives to drive growth and value creation.
