Fresh quarterly-high bookings (consequently, also for the year) amid little or no change in market-wide volumes is a clear sign of Sobha’s market-share gains.
This augurs well for the ensuing launch pipeline, and bookings momentum is likely to continue as marketing efforts persist and smaller peers find it difficult to cope with the more demanding operating environment.
As expected, net debt rose as capex peaked and RERA rules contained real-estate inflows. A better CF generation is expected ahead, but land acquisition is likely to decide the quantum of FCF. On the improved launch momentum and healthy bookings, we retain our ‘sanguine’ outlook.
On the market-share gains-driven strong volumes, Sobha finally attained its long-elusive full year volume target of 4m sq ft With a healthy launch pipeline (4m sq ft) and with the potential to release another 9m sq ft from existing projects, management sees better volumes ahead; but expects non-Bengaluru markets to grow better.
Long-term annual volume guidance of 7.5m sq ft holds, and the management realises it would need broad-based contribution.
The fourth quarter is significant as Sobha added Ahmedabad to its list of regions where it operates. Encompassing 0.5m sq.ft., Q4 volumes (5k sq.ft.) for this affordable-housing project are nothing much to write about as the project hit the markets toward end-March 2019.
The management highlights that the response has been healthy, and phase-II launch is already in the works. More bookings from new launches (against accelerated cash-flow generating near-ready inventory last year) and higher construction outlay (on new launches) led to the RE project surplus declining y/y as well as q/q.