Sobha extends rally on strong Q1 operational update; zooms 25% in four days

Shares of Sobha moved 6 per cent higher to Rs 677.85 on the BSE in Friday’s intra-day trade, surging 16 per cent in the past two trading days after the real estate developer posted a strong operational update for Q1FY23. The stock has zoomed 25 per cent in the past four sessions as against a nearly 3 per cent gain in the S&P BSE Sensex.

Sobha said it achieved the highest ever quarterly sales volume of 1.36 million sft in April-June quarter (Q1FY23), up by 51.7 per cent year-on-year (YoY). Sequentially, the company’s sales volume rose by 1.21 per cent.

The company said that it recorded highest ever share in the sales value since inception, rising by 66.7 per cent to Rs 951.7 crore in Q1FY23 from Rs 570.9 crore in Q1FY22. Sequentially it rose 1.8 per cent from Rs 935.2 crore reported in Q4FY22.

Average Price realization improved to Rs 8,431/sft, with price increases across ongoing projects. The company further said its Bengaluru sales volume & value have been the highest ever since inception on the back of 3 new projects launches. The company’s cash flows remained healthy during the quarter resulting in further net debt reduction, it said.

Despite increase in prices, higher home loan rates, demand for homes of the brand continues to be strong across segments, particularly in Bengaluru and Gurugram. Improved visibility of GIFT City has seen increased demand for the company’s projects.

“With the aid of new launches in Bengaluru, consistent sales velocity in ongoing projects, we have achieved the highest ever sales volume, value and price realization in this quarter,” Sobha said in its operational update.

Meanwhile, according to Motilal Oswal Financial Services, most companies witnessed a 12-15 per cent rise in construction cost. Since the same constitutes just 25-40 per cent of the sale price, the overall impact on margin is restricted to 3-6 per cent.

The companies have mitigated this cost impact via price hikes of 5-8 per cent in FY23. They are looking to raise prices further to improve margin. In a rising interest rate environment, companies see an impact only once mortgage rates cross 8-8.5 per cent, the brokerage said in a real estate sector update.

However, in the past six months, the stock has underperformed the market by falling 21 per cent as compared to a 9 per cent fall in the S&P BSE Sensex.

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