Maintain buy on Sobha Developers with target price of Rs 510: Motilal Oswal

Sobha Developers (Sobha) reported Q4FY15 revenue of Rs 510 crore (-19% y-o-y) missed estimates due to delay in recognition from Silicon Oasis II, which was expected to reach threshold in Q4. Ebitda de-grew 17% y-o-y to Rs 142 crore and Ebitda margin bounced back.

Sobha Developers (Sobha) reported Q4FY15 revenue of R510 crore (-19% y-o-y) missed estimates due to delay in recognition from Silicon Oasis II, which was expected to reach threshold in Q4. Ebitda de-grew 17% y-o-y to R142 crore and Ebitda margin bounced back. PAT was in line with estimates.

Q4FY15 presales recovered with the contribution of Sobha Dream Acres to 1.03msf (R630 crore), translating into FY15 annual presales of 3.3msf (R2,090 crore)—11% de-growth y-o-y. Real estate collections hit multi-quarter low on account of weakness in presales. Q4 recorded FCFE of negative R50 crore, translating into net debt of R1,810 crore.

The management guides for 4msf (R2,600 crore) in FY16, implying 24% growth. Long-term target of 7-8msf annual presales from FY18 remains under the radar. New product segment (Dream Acre) is expected to be the key contributor . Momentum in the Bangalore market is expected to continue. NCR, Pune, and Chennai markets are likely to witness some traction in FY16.

The recent corrections made the stock attractive for operational recovery play. Maintain buy with a target price of R510 (25% upside).

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