One of the real estate stocks engaged in construction to operations of townships, housing projects, commercial premises, and other related activities jumped by 6.31 percent after international brokerage Investec provide an upside potential of 34 percent.
Stock movement
In Wednesday’s trading session, Sobha Limited‘s share jumped by 6.31 percent from the previous close of Rs. 1,514.75. The stock opened at Rs. 1,547.35 and is currently trading at Rs. 1,605, with a high of Rs. 1,633.65 and a low of Rs. 1,527.85. The market capitalization now stands at approximately Rs. 17,166.09 crore.
Target Recommendation
International brokerage Investec initiated coverage on Sobha Limited with a ‘buy’ rating and a price target of Rs 2,150, suggesting a significant 33.96% upside potential from the current price of Rs 1,531.05.
The positive outlook is backed by the company’s consistent healthy operating cash flow generation, reduced leverage, and strategic expansion plans into Mumbai and Noida markets within the next 2-3 years.
The brokerage anticipates an 18% CAGR in pre-sales growth during FY24-FY27, driven by Sobha’s robust project pipeline. Additionally, the potential monetization of land reserves and expansion of JD business could further enhance profitability, making it an attractive late-recovery play in the real estate cycle.
Contract Portfolio
Sobha Limited’s contract portfolio shows steady revenue of Rs 1.64 billion in H1-24 and H1-25 while manufacturing revenue slightly decreased from Rs 2.01 billion to Rs 1.53 billion. The company’s ongoing projects include 7 developments across Bangalore (6 projects) and Sonepat (1 project), totaling 4.05 million square feet of built-up area.
Manufacturing Division
The company manufacturing division encompasses three key segments, which include Glazing & Metal Works (Rs 0.62 bn turnover), Interiors & Mattresses (Rs 0.48 bn turnover), and Concrete Products (Rs 0.43 bn turnover). This integration enables them to deliver turn-key projects with world-class quality through their own manufacturing facilities.
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New Projects Launch
Sobha Limited has forthcoming projects totaling 20.48 million square feet across various regions. The largest upcoming developments are in Bangalore (12.27 m sft), followed by Gurgaon (4.62 m sft), Kerala (1.97 m sft), Noida (0.69 m sft), Pune (0.77 m sft), and Tamil Nadu (0.15 m sft). The company projects are in the advanced stages of design and various approval processes, scheduled for launch within the next 6–8 quarters.
Recent quarter results and ratios
Sobha Limited’s revenue has increased from Rs. 741 crore in Q2 FY24 to Rs. 934 crore in Q2 FY25, which has grown by 26.05 percent YOY. The net profit of Sobha Limited has also grown by 73.33 percent, from Rs. 15 crore in Q2 FY24 to Rs. 26 crore in Q2 FY25.
Sobha Limited’s revenue and net profit have grown at a CAGR of 13.65 percent and -7.54 percent, respectively, over the last five years. In terms of return ratios, the company’s ROCE and ROE should be 7.12 percent and 1.97 percent, respectively. The debt-to-equity ratio of the company is to be 0.44x. Sobha Limited’s EPS is to be Rs. 5.07.
About the Company:
Sobha Limited was established in 1995 and is an Indian real estate development company specializing in residential and commercial construction projects. The company operates through real estate and contractual manufacturing segments, they develop townships, luxury homes, and commercial spaces. The company also produces interior furnishings, glazing, metal works, and concrete products through its manufacturing division.
Written by – Nikhil Naik
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