Shares of Sobha Ltd. are trading close to their 52-week high after the real estate developer reported its best-ever sales volume during the quarter ended December without any major launch.
“During Q3 FY21, we have achieved a total sales volume of 11,33,574 square feet of super built-up area,” the Bengaluru-based company said in an exchange filing. Overall sales value rose 22.2% to Rs 887.6 crore during the reported quarter compared with Rs 726.1 crore a year ago.
Bengaluru, the filing said, has returned to normalcy and has contributed 69% of the total sales volume, along with “meaningful contribution” from other regions, especially Gurugram, Kerala and Pune. “Sales volume achieved by Kochi and Thrissur regions during 9MFY21 has already surpassed that achieved during FY20.”
Average price realisation for the quarter also rose 15% year-on-year to Rs 7,830 per square foot, which, according to the company, is the highest in six quarters.
Sobha also expects the second half of FY21 to be better than the year-ago period on the back of new launches planned in various cities and inherent demand for housing. “With a continuous focus on cash flow management, we were able to manage our net debt levels, finance costs and other costs during the quarter,” the company said, adding its average interest costs continued to reduce as on Dec. 31, 2020.
According to Jefferies India analyst Abhinav Sinha, the good sales performance despite no significant new launches implies inventory reduction, which is a positive for cash flows.
Murtuza Arsiwala of Kotak Institutional Equities agreed. “Increased sales traction, along with resumption of construction activities, will likely result in improving cash flows for the company,” he said in a note. “Strong planned launches over the next few quarters are likely to maintain sales momentum.”
Another possible trigger the stock rally could be Maharashtra agreeing to reduce by half fees on government approvals for new and upcoming construction on recommendations of a panel headed by Deepak Parekh.
“Premiums will be reduced by 50% and developers who avail this benefit will have to pay stamp duty on behalf of the homebuyers,” Bhushan Gagrani, principal secretary of the Urban Development Department of Maharashtra, told BloombergQuint over the phone.
Shares of Sobha gained as much as 7.4% to Rs 441 — the highest since Feb. 4, 2020. All the 22 analysts tracking Sobha have a ‘buy’ rating. The stock is trading 15% higher than its 12-month Bloomberg consensus price target of Rs 373 apiece.