Sobha’s 3Q presales (+12% Y/Y) and 9M (Flat Y/Y) highlight challenging on-ground conditions and impact of launch delays in high-value NCR/ Kochi due to approval issues. Presales continue to be driven primarily by the company’s affordable housing Dream Acres project in Bangalore.
Overall 9M presales were Rs14.7B (flat Y/Y) and need a jump in Q4 to come close to full-year guidance levels (18% target growth). Whilst 4Q can likely see an improvement on account of two luxury launches, it’s unlikely, in our view, that full-year guidance will be met. Our estimates call for a flattish performance through FY16 (2% growth).
Sobha reported presales of Rs4.8B/ 0.8msf in Dec-Q, up 12% Y/Y/ 22% Y/Y on a low base of last year. Presales during Dec-Q were primarily driven by inventory sales in ongoing projects. Bangalore market continues to deliver stable performance driven by steady offtake in its affordable Dream Acres housing project. Sales performance of other key markets Chennai, NCR Pune, Kochi remains very subdued.
Chennai market performance was also adversely impacted due to recent floods. Average realizations at Rs 5.9Kpsf are down 8% due to mix change with higher contribution coming from Dream Acres mid-income project though we note that margins likely will be better than the overall company average on account of cheap imputed land cost here.
Dec-Q did not witness any new launch. The company’s key group housing launch in NCR got delayed due to approval delays and is now expected to happen this month.