Sobha shares jump 9% on strong Q4 numbers; Choice Broking sees another 24% potential upside
Sobha share price: The stock today soared 9.34 per cent to hit a day high of Rs 554.90 over its previous close of Rs 507.50. Considering Tuesday's high price, the scrip traded 34.55 per cent higher from its 52-week low of Rs 412.40, a level seen on March 29, 2023. Yet, the counter has lost 26.01 per cent from its one-year high of Rs 750, hit on September 9 last year.
- May 30, 2023,
- Updated May 30, 2023 10:48 AM IST
Shares of Sobha Ltd climbed in Tuesday's trade, snapping their four-day losing run. Today's sharp movement in the share price came after the real estate developer posted a more-than-three-fold jump in fourth-quarter profit (Q4 FY23), helped by soaring housing demand. Consolidated profit rose to Rs 48.60 crore in the quarter that ended March 31, 2023, up 242.25 per cent from Rs 14.20 crore a year earlier. The company's revenue from operations surged 70.30 per cent to Rs 1,210 crore in Q4 FY23. The stock today soared 9.34 per cent to hit a day high of Rs 554.90 over its previous close of Rs 507.50. Sobha, however, trimmed around half of its gains and was last seen trading 4.93 per cent higher at Rs 532.50.
Considering Tuesday's high price, the scrip traded 34.55 per cent higher from its 52-week low of Rs 412.40, a level seen on March 29, 2023. Yet, the counter has lost 26.01 per cent from its one-year high of Rs 750, hit on September 9 last year. Choice Broking has given an 'Outperform' rating to the realty developer with a one-year target price of Rs 689, suggesting a potential upside of 24.17 per cent.
"In Q4 FY23, Sobha delivered healthy pre-sales growth. Overall collection improved by 33 per cent. Revenue from the contract manufacturing de-grew by 45 per cent, year-on-year (YoY). Management expects contract and manufacturing losses to narrow in the coming quarters as the company is currently executing low-margin contracts won during the Covid-19 period. Management expects FY24 for the contract manufacturing segment to be better than FY23," the brokerage stated.
Choice also said that during the year, Sobha reduces its debt by Rs 500 crore and generated a net cashflow of Rs 697 crore, up by 36 per cent. "Over the past several quarters, the company has been able to reduce its debt through healthy cash flow generation led by record pre-sales and improvement in construction activities," it mentioned.
"Sobha is on the cusp of generating healthy pre-sales over FY24-FY25, led by a robust launch plan). We maintain our 'Outperform' rating, driven by low market inventory paving the way for aggressive launches, presence in fast-growing Tier-I cities (Bengaluru, Chennai, Gurugram), large land parcels at historically cheap value, and reducing debt level," Choice further said.
On the technical setup, the stock was seen trading higher than the 5-day, 20-, 50- and 100-day moving averages but lower than the 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 62.35. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 44.86. It has a price-to-book (P/B) value of 2.13.
The scrip has an average target price of Rs 813, Trendlyne data showed, suggesting a potential upside of 52 per cent. It has a one-year beta of 0.93, indicating low volatility on the counter.
Meanwhile, Indian equity benchmarks traded higher in late-morning deals today, led by gains in consumer, metals and energy stocks.
Also Read | Adani Ports, ITC, Patanjali Foods, Brightcom group, other stocks to watch on May 30, 2023
Shares of Sobha Ltd climbed in Tuesday's trade, snapping their four-day losing run. Today's sharp movement in the share price came after the real estate developer posted a more-than-three-fold jump in fourth-quarter profit (Q4 FY23), helped by soaring housing demand. Consolidated profit rose to Rs 48.60 crore in the quarter that ended March 31, 2023, up 242.25 per cent from Rs 14.20 crore a year earlier. The company's revenue from operations surged 70.30 per cent to Rs 1,210 crore in Q4 FY23. The stock today soared 9.34 per cent to hit a day high of Rs 554.90 over its previous close of Rs 507.50. Sobha, however, trimmed around half of its gains and was last seen trading 4.93 per cent higher at Rs 532.50.
Considering Tuesday's high price, the scrip traded 34.55 per cent higher from its 52-week low of Rs 412.40, a level seen on March 29, 2023. Yet, the counter has lost 26.01 per cent from its one-year high of Rs 750, hit on September 9 last year. Choice Broking has given an 'Outperform' rating to the realty developer with a one-year target price of Rs 689, suggesting a potential upside of 24.17 per cent.
"In Q4 FY23, Sobha delivered healthy pre-sales growth. Overall collection improved by 33 per cent. Revenue from the contract manufacturing de-grew by 45 per cent, year-on-year (YoY). Management expects contract and manufacturing losses to narrow in the coming quarters as the company is currently executing low-margin contracts won during the Covid-19 period. Management expects FY24 for the contract manufacturing segment to be better than FY23," the brokerage stated.
Choice also said that during the year, Sobha reduces its debt by Rs 500 crore and generated a net cashflow of Rs 697 crore, up by 36 per cent. "Over the past several quarters, the company has been able to reduce its debt through healthy cash flow generation led by record pre-sales and improvement in construction activities," it mentioned.
"Sobha is on the cusp of generating healthy pre-sales over FY24-FY25, led by a robust launch plan). We maintain our 'Outperform' rating, driven by low market inventory paving the way for aggressive launches, presence in fast-growing Tier-I cities (Bengaluru, Chennai, Gurugram), large land parcels at historically cheap value, and reducing debt level," Choice further said.
On the technical setup, the stock was seen trading higher than the 5-day, 20-, 50- and 100-day moving averages but lower than the 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 62.35. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 44.86. It has a price-to-book (P/B) value of 2.13.
The scrip has an average target price of Rs 813, Trendlyne data showed, suggesting a potential upside of 52 per cent. It has a one-year beta of 0.93, indicating low volatility on the counter.
Meanwhile, Indian equity benchmarks traded higher in late-morning deals today, led by gains in consumer, metals and energy stocks.
Also Read | Adani Ports, ITC, Patanjali Foods, Brightcom group, other stocks to watch on May 30, 2023