Sharekhan Positive On This Midcap Stock: 25% Return, Company Plans Doubling Annual Sales To 10msf

Brokerage firm Sharekhan suggests buying the stocks of Sobha Ltd. The management ambitiously plans to double the annual sales run-rate to 10 million square feet (msf) in 3-4 years. It is a prominent real estate company in India.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of Sobha Ltd. is Rs. 662. Sharekhan has estimated a Target Price for the stock at Rs. 827.5. This stock has the potential to give a 25% return, in the upcoming 1 year. This is a mid-cap stock with a market capitalization of around Rs. 6,295 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 662
Target Price	Rs. 827.5
Potential 1 year return	25.00%
52 week high share price	Rs. 1,044.95
52 week low share price	Rs. 480.20

Sobha announced more than a 65% y-o-y rise in total sales and share of sales value to Rs. 1146 crore and Rs. 952 crore, respectively, for Q1FY2023. Bengaluru project launches and price hikes aided strong sales performance. Sobha announced strong sales booking for Q1FY2023 with highest-ever quarterly sales volume of 1.36 million square feet (msf - up 52% y-o-y). Its three new launches in Bengaluru, aggregating to over 2 msf of saleable area apart from rise in average price realizations (up 11% y-o-y) led to strong sales performance.

Stock advantages and risks: Sharekhan

Commenting on the stock's advantages, Sharekhan said, "We believe that a strong project pipeline and strong business dynamics in Bengaluru region would aid in achieving strong sales for Sobha going ahead. Strong Q1FY2023 sales bookings: Sobha achieved its highest ever quarterly sales volume at 1.36 msf (up 51.7% y-o-y, up 1.2% q-o-q) for Q1FY2023. Apart from strong volume growth, total sales value was driven by 10.6% y-o-y rise (up 2% q-o-q) in average price realizations at Rs. 8431/sft on account of price increase taken across ongoing projects. We stay positive on Sobha and expect an upside of 25% given its expected scale-up, paid-up land bank, cash flow generation and favourable valuation."

However, delay in execution, higher commodity prices and weak macroeconomic environment are key risks to Sharekhan's call.

Company profile:

Sobha, headquartered in Bangalore, primarily focuses on residential and contractual projects. With 3 decades of experience, Mr. P.N.C. Menon founded SOBHA Limited in 1995. In 2006, SOBHA went public through its initial public offering. Sobha was founded by Mr P.N.C Menon in August 1995. The Bengaluru-based group has been engaged in the construction and development of real estate for the past 26 years. As on September 30, 2021, it had developed 1147.2 lakh sq ft, of which around 75% is in Bengaluru. The group also has presence in Thrissur, Chennai, Pune, Gurugram, Coimbatore, Calicut, Mysuru and Cochin.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.