Sobha has rallied over 30% in the three months. We believe the market is now assigning a higher value to the residual land bank than three months ago. We value the residual land bank at the multiple to the book value (provided book value is lower than the market value of land) and not at market value as residual land is not realisable in the next year. Our multiple is based on the current pace of sales and that over the next few years.
In Bangalore, although Sobha has increased the value of area sold in the past two years (on higher realisation), volumes have remained flat. Sobha has launched more luxury and superluxury projects in FY14. We maintain our sales estimates of 3.9 million and 5 million sq feet for FY15e and FY16e on the back of launches in new markets, but maintain steady run-rate of sales in existing markets. We await management plans to further increase volumes in existing markets, especially Bangalore.
Kotak Institutional Equities