Sobha shares rise in early deals as Investec sees 42% upside 

Shares of Sobha Ltd zoomed 5% in early deals on Friday after the brokerage Investec initiated coverage on the real estate stock with a buy call. The brokerage has assigned a target price of Rs 2,150, a 42% upside to the previous close. Shares of Sobha Ltd rose 4.76% to Rs 1587 against the previous close of Rs 1514.75 on BSE. Market cap of the firm climbed to Rs 16,701 crore.

Total 0.11 lakh shares of the firm changed hands amounting to a turnover of Rs 1.66 crore on BSE.  

Sobha stock has gained 83.28% in a year and risen 57% in 2024. The stock fell to its 52-week low of Rs 849.43 on November 24, 2023.

Sobha stock has a one-year beta of 1.2, indicating very high volatility during the period.    

In terms of technicals, the relative strength index (RSI) of Sobha stands at 35.9, signaling it's trading neither in the overbought nor in the oversold territory. Shares of Sobha stand lower than the 10 day, 20 day, 30 day, 50 day, 100 day, 150 day, 200 day but higher than the 5 day moving averages.    

Investec said the real estate developer has benefited from robust demand and higher realization in Bengaluru. The company has consistently generated healthy OCF while reducing balance sheet leverage.

The brokerage is bullish on the realtor's plan to strategically enter Mumbai/Noida, targeting a strong long-term presence in these markets within 2-3 years. 

Investc sees 18 per cent CAGR pre-sales growth over FY24-FY27 considering a strong project pipeline. It further said real estate company has strong project pipeline that will drive its pre-sales.

Meanwhile, ICICI Securities has a price target of Rs 1628 on the stock. It has an add rating for the stock. 

"As of September 2024, Sobha has launched five projects across 3.5 msf in H1FY25 and maintains its guidance of launching another 5.5msf of projects in H2FY25. However, this is contingent on timely approvals coming through, which has been an industry issue over the last few months in Bengaluru. Hence, ICICI Securities cut its FY25/ FY26 sales bookings estimates by 7-8% to Rs 85 billion/Rs 88 billion, baking in the possibility of launch delays," said ICICI Securities. 

Adjusting for the two tranches of rights issue proceeds of Rs 10 billion each (Rs 20 billion overall) in FY25, the brokerage upgraded Sobha to ADD, from Hold, with a revised target price of Rs 1,628 (vs. Rs 1,814 ex-rights issue) and cash flow adjustments post the 11% decline in stock price over the last three months. 

Sobha clocked a 74.5 per cent year-on-year (Y-o-Y) rise in Q2 profit to Rs 26 crore in the September quarter of financial year 2025 (Q2FY25) from Rs 14.9 crore in the same quarter a year ago (Q2FY24). Revenue from operations climbed 25.9 per cent Y-o-Y to Rs 933.5 crore in Q2FY25, as against Rs 741.2 crore in the same quarter a year ago (Q2FY24).