Sobha leaps 14% as Q2 sales volume jumps 37% QoQ; stk up 77% so far in FY21

Shares of Sobha Ltd leaped 14.2 per cent to Rs 273 apiece on the BSE on Tuesday after the real estate major reported improved sequential sales in September quarter. Sales volume, total sales value and Sobha share of sales value during Q2FY21 were up by 37 per cent, 41 per cent, 35 per cent, respectively as compared to Q1FY21, the company said.

"During Q2FY21, we have achieved a total sales volume of 891,700 square feet valued at Rs 6.90 billion, with a total average realization of Rs 7,737 per square feet. This performance was achieved despite lockdown being imposed in Bengaluru in the month of July, no new launch during the quarter, uncertain macro-economic outlook and tough real estate sector scenario," the company said in a statement. Price realization of Rs 7,737/square feet achieved during Q2FY21 is the highest price realization achieved by the company as compared to past 5 quarters.

The Bengaluru-based real estate developer's dependency on the city in terms of sales volume also reduced from 74 per cent during Q1FY21 to 60 per cent during Q2FY21.

"We continue to enjoy sufficient liquidity from banks/FI to meet our obligations. We remain focused on cash flow management and cost optimization which has helped us to manage our cash flows efficiently during the quarter. We continue to bring down our average cost of borrowing and as a result, cost of borrowing as of 30th Sep 2020 came down meaningfully. As informed during Q1FY21 operational update, enquiry levels are almost at the pre-Covid levels, which will help us to perform better in the second half of the FY 20-21," the company said. READ HERE

At 11:18 am, the stock was quoting at 12 per cent to Rs 268 per share, as against 0.85 per cent rise in the benchmark S&P BSE Sensex. So far in the current financial year, the stock has jumped 77 per cent, as against 32 per cent gain in the Sensex index, BSE data show.

Analysts at Kotak Institutional Equities see the fair value of the stock at Rs 400 on the back of steady cash flow, and increase in enquiries to pre-Covid levels.

"Sobha reported another resilient quarter with gross sales values increasing 1 per cent YoY to Rs6.9 bn along with sales volume of 0.9 mn sq. ft (-14 per cent yoy) in 2QFY21. We highlight this is the second quarter of resilient sales performance amid Covid-19 for Sobha, taking total sales in 1HFY21 to 1.54 mn sq. ft (-26.5 per cent yoy) even as the sector continues to reel under weaker demand," it said in a report dated October 5. The brokerage believes Sobha trades at 0.8X P/B on FY2022E, a steep discount to long-term average of 1.3X P/B (1-year forward). It has 'Buy' call on the stock.