Sobha Q2 Results Review - Landbank Rationalisation; Pipeline Provides Healthy Visibility: Motilal Oswal

Motilal Oswal Report

Sobha Ltd. continues to provide strong growth visibility by unlocking its vast land reserves. Additionally, the ongoing fund raise and strong cash flows will enable the company to focus on new land acquisitions, which will further enhance its growth pipeline.

We incorporate the updated launch pipeline and new projects acquired during the year. The ongoing and upcoming projects are likely to generate Rs 150 billion of gross cash flows and value the same at Rs 95 billion.

Sobha’s ~190msf of balance land reserve is valued at Rs 90 billion, assuming 25-75 years of monetization. The company trades at 8.5 times FY25E enterprise value/Ebitda (based on FY25E pre-sales), which is at a 15-30% discount to its comparable peers (Prestige Estate, Godrej Properties, Mahindra Lifespace Developers, and Sunteck).

We reiterate our Buy rating on the stock with an unchanged target price of Rs 2,213, indicating a 44% upside potential.

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