Sobha shares jump over 19%: Real estate stocks experienced significant gains on January 4, with shares of numerous companies witnessing an increase. This surge propelled the Nifty Realty Index to a new all-time high of 835.35, marking a 6% rise. Notably, Sobha, a real estate company, saw a remarkable uptick of approximately 20%. Presently, the stock is trading at Rs 1,268.95, reflecting a substantial increase of 13.35%.
Motilal Oswal Financial Services, a brokerage firm, has designated Sobha as one of its top pick stocks for the year 2024. Investors are advised to consider buying this stock, with a target price set at Rs 1400.
Sobha share hit 52 Week High
| Metric | Information |
|---|---|
| Stock Movement | Sobha shares surge over 19%, hitting Rs 1,334.70 |
| Brokerage Recommendation | Motilal Oswal selects Sobha as the top idea for FY24 |
| Target Price Revision | The price target was revised to Rs 1,400, implying a 25% upside |
| Recent Performance | Stock records a 10% rally on Wednesday, gains of over 30% in the last two sessions |
Sobha shares experienced a remarkable surge, surpassing 19%, reaching their 52-week highs at Rs 1,334.70 on the NSE. The surge was propelled by Motilal Oswal’s endorsement, designating Sobha as its top pick for FY24 and revising the price target to Rs 1,400, indicating a substantial 25% upside in the counter.
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Motilal Oswal’s assessment of the stock follows a 10% rally on Wednesday, contributing to gains exceeding 30% in the last two sessions. The brokerage report underscores Sobha’s commitment to sustainable growth, backed by healthy cash flows and profitability. It emphasizes the company’s strategic focus on unlocking its extensive land reserve and exploring external growth opportunities, leveraging its robust balance sheet.
While anticipating outperformance driven by improved profitability and enhanced visibility in monetizing large land parcels in Bengaluru, Motilal acknowledges associated risks. These risks include a potential slowdown in residential absorption and delays in the monetization of substantial land holdings.
Sobha’s exceptional performance is evident in its multi-bagger returns of 131% over the last 12 months, surpassing the Nifty Realty index and broader Nifty at 94% and 19%, respectively.
Motilal notes that Sobha is trading at 6.5X its FY25E EV/EBITDA, presenting a 25-40% discount compared to comparable midcap/smallcap peers such as Prestige Estates Projects, Brigade Enterprises, Mahindra Lifespace Developers, and Sunteck Realty.
Top 5 Triggers for Sobha’s Positive Outlook:
- The company delivered a 30% CAGR in pre-sales over FY21-23, driven by strong demand, increased launches, and rising prices, with notable contributions from NCR, GIFT City, and Hyderabad.
- Sobha reported a 12% CAGR in pricing, led by substantial appreciation in markets like NCR (+21%), GIFT City (+16%), and Pune (+10%).
- Motilal Oswal anticipates Sobha to scale up launches to 9-10 million square feet by FY26, likely resulting in a 25% CAGR in pre-sales, reaching Rs 10,000 crore through FY23-26.
- The management’s focus on reducing leverage over the last three years, particularly intensified under CEO Jagadish Nangineni since March 2022, indicates a strategic shift toward restarting investments in land, leveraging healthy cash flows. The company’s operating cash flow could increase to Rs 1,300 crore by FY26.
- Contract margins stabilized, and residential margins are expected to improve from FY25 onward.