Motilal Oswal Initiates "Buy" On Midcap Real Estate Stock, Claims 50% Potential Upside

Motilal Oswal initiates coverage on Sobha Ltd with a positive outlook, recommends "Buy". The brokerage has estimated a target price of Rs 855 apiece on the stock of the company. If you buy the stock at the current market price it would likely give a healthy return of up to 50% from its current market price considering the given target price by the brokerage. This is a Real Estate sector midcap stock having a market price of Rs 5,415.22 crore. Here are the key details about the stock:

Sobha Ltd Stock Performance

The share price of Sobha on NSE last traded at Rs 570.95 apiece, down 1.12% from the previous close of Rs 577.40 apiece. The stock recorded its 52 week low on 20 June 2022 at Rs 480.20 apiece and 52 week high on 9 February 2022 at Rs 894.90 apiece, respectively.

The stock has given 2.54% negative return in the past 1 week, 3.68% negative return in 1 month and 8.16% negative return in 3 years, respectively. In the past 1 year, it has given 34.07% negative return. The stock has given 40.61% positive return in 3 years. In the past 5 years, it gave 0.67% positive return.

Motilal Oswal recommends "Buy" Stock with a target price of Rs 855/share

The Brokerage said, "Sobha expects to launch 6msf of projects in FY24, which indicates that the existing quarterly pre-sales run rate will be sustained in FY24. Thus, we increase our FY24E sales booking by 5% to INR56b. The company indicated that margin pressure in the contractual business will continue for at least one more quarter; hence, we reduce our FY23 EBITDA/PAT estimates by 19%/42%.

It added, "Sobha is progressing well on the pre-sales growth trajectory. The steady cash flow is enabling debt reduction and renewed focus on new land investments. However, we believe material re-rating triggers are at least a year away, as the company is preparing for project launches at a couple of its large land parcels in Hosur and Hoskote, which will drive re-rating in the implied land valuation. That said, the current valuations imply a steep 50% discount to the book value of land, which is unwarranted. We arrive at a fair land value of INR41b (applying 20% discount to derived value) v/s INR15b of implied value. We reiterate our Buy rating on the stock with a TP of INR855, an upside potential of 48%."

Disclaimer
The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.

Motilal Oswal recommends "Buy" Stock with a target price of Rs 855/share

The Brokerage said, "Sobha expects to launch 6msf of projects in FY24, which indicates that the existing quarterly pre-sales run rate will be sustained in FY24. Thus, we increase our FY24E sales booking by 5% to INR56b. The company indicated that margin pressure in the contractual business will continue for at least one more quarter; hence, we reduce our FY23 EBITDA/PAT estimates by 19%/42%. 

It added, "Sobha is progressing well on the pre-sales growth trajectory. The steady cash flow is enabling debt reduction and renewed focus on new land investments. However, we believe material re-rating triggers are at least a year away, as the company is preparing for project launches at a couple of its large land parcels in Hosur and Hoskote, which will drive re-rating in the implied land valuation. That said, the current valuations imply a steep 50% discount to the book value of land, which is unwarranted. We arrive at a fair land value of INR41b (applying 20% discount to derived value) v/s INR15b of implied value. We reiterate our Buy rating on the stock with a TP of INR855, an upside potential of 48%."

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.