Sobha delivered its best-ever pre-sales of ~1.3msf in Q4FY21 (up 48% y-o-y, 18% q-o-q); its share in new sales at Rs 8.7 bn improved 59% y-o-y and 29% q-o-q fuelled by 2.8msf of launches in the quarter. Net debt edged down to ~Rs 28.5 bn (Rs 29.8 bn in Q3FY21). Mgmt indicated launches remain on track and the company will continue to focus on cash flow management.
We expect buoyancy in sales to sustain riding revival in housing demand and Sobha’s robust ~14msf launch pipeline. We continue to follow the old AS; maintain Buy with revised SOTP-based TP of Rs 574 as we roll forward valuations to Sep 2022e.
Sales continue to gain traction: Growth was aided by higher sales in Bengaluru (up 13% q-o-q), Gurugram (91% q-o-q) and Pune (130% q-o-q). FY21 sales at 4.0msf fell mere 1% y-o-y despite the lockdown in Q1FY21. Sobha launched ~2.8msf projects in Q4FY21 (2.9msf in FY21); it has a robust launch pipeline of ~14msf projects over the next four–six quarters. It expects to launch ~7msf projects in H2CY21 and ~3msf in H1CY22.
Robust collections spur debt reduction: Aided by healthy collections (up 13% q-o-q), the company managed to reduce its net debt q-o-q to Rs 28.5 bn in Q4FY21. Net cash flow for FY21 at Rs 2.3 bn was the best-ever in the company’s history. Management expects debt to reduce by ~Rs 1.5-2.0 bn in FY22 and debt:equity to reach 1.1x by H1FY23 (1.17x at end-FY21).
Outlook: Cash flows paramount– With demand recovering and launches likely to pick up, we believe Sobha’s focus on cash flows will hold it in good stead. We maintain ‘BUY/SN’.