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Home >Markets >Mark To Market >Sobha’s record Q3 sales lift stock; execution of land bank key monitorable

Shares of Bengaluru-based real estate developer Sobha Ltd rose nearly 5% on Thursday after the company announced robust sales data for the December quarter. Currently trading at 430.75 on the NSE, the stock is nearing its 52-week high of 464.

It saw a total sales volume of 1.1 million square feet in the December quarter. Volumes improved 6% on a year-on-year (y-o-y) basis and 27% sequentially. According to the company, this is its best-ever quarterly sales performance.

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Analysts say, the company is benefitting from the ongoing consolidation in the sector and its improved sales performance in other markets apart from Bengaluru is a positive.

According to the company's management, its key market of Bengaluru has returned to normalcy and has contributed 69% to the total sales volume. As for other markets, Kochi increased its share to 9% of overall sales, while Gurgaon had a sales contribution of 9% during the quarter.

Realisations at Rs7,830 per square feet improved 15% y-o-y, however it was flat sequentially. Analysts say annual growth in realisations is reflective of change in sales mix across cities. Better contribution from cities such as Gurgaon and Kochi seem to have aided improvement in realisations, they add.

It should be noted that Sobha launched only one project—Sobha City Athena in 3QFY21 and has completed inventory of 14.4 million square feet. Analysts say, this is indicative of reduction in inventory, which should translate into better cash flows. Going forward, the management remains hopeful of strong sales momentum in 2HFY21 courtesy low interest rate environment.

In a report dated 6 January, analysts at Kotak Institutional Equities said, “Increasing residential sales traction continues to keep us positive on the stock with a revised fair value of Rs440/share (from Rs400/share)."

While analysts from JM Financial Institutional Securities Ltd are positive on the stock, they caution that execution of land parcels remains critical for significant upside potential. “Improvement in demand and execution of land parcels (Hoskote - 280acres) remain key monitorables," they said in a report on 7 January.

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