This Small Cap Stock Is Going Down After Q1 Results, But Analyst Sees Over 50% Upside

Shares of Sobha have been under pressure ever since the company posted its results for the June quarter earlier this week. Analysts at ICICI Securities, however, were impressed by the company’s sale update for the quarter.

The Sobha Analyst: Adhidev Chattopadhyay-led analyst team at ICICI Securities maintained the ‘buy’ rating for the stock with a price target of ₹891, indicating an around 53% upside from the stock’s last closing price of ₹581.40.

The Sobha Thesis: The firm noted that the realty company achieved record gross sales bookings of 1.39msf (million square feet) worth ₹1470 crore in the June quarter. The brokerage highlighted that the strong start to the financial year comes on the back of a strong FY23 (April 2022-March 2023) operating performance where the company had clocked its best-ever annual sales performance.

The analysts added that going forward the company plans to launch at least 4-5msf of new projects in the second half of FY24 as demand remains resilient. The new guidance is a slight cut from the earlier
7 msf owing to a delay in approvals for a few launches in Bengaluru.

The firm noted that if approvals for all the planned launches come through, then Sobha is targeting 15-
20% growth in gross sales bookings for FY24.

In the June quarter, consolidated net debt decreased by ₹70 billion to ₹1,570 crore. However, Sobha foresees a gradual reduction in debt going forward due to higher expenditures on land acquisition and construction, the analysts noted.

Price Action: Sobha’s share price was down 0.63% to trade at ₹577.75 in the early hours of trading on Wednesday.

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsICICI SecuritiesSobha Developers