Sobha Developers Present Good Dec 2012 Quarter Results

We have been quite bullish on the realty segment since the past few months. An expected rate cut (a 25 basis points repo rate cut has been announced) and the expected revival in the sector, were the reasons for our assumption. Rather, we were quite confident of a revival in the cities like Bangalore and Pune. 

There are 2 factors behind the better performance of the company for the quarter. First, the average realisation of the company has increased to Rs 5910 per square foot, up by 8% on a YoY basis. Apart from that, the company has managed to post new sales volume of 0.90 mn sq ft, which is up by 10.20%. The combination of both these factors has helped the company put in better performance for the quarter.

On the financial performance, J C Sharma (Vice Chairman and Managing Director, Sobha Developers) stated, “This has been the best quarter ever in terms of cash realisation from our operations. It further strengthens our faith that there is a large market for discerning buyers who appreciate and value a superior, quality oriented product”.

As regards the operational performance, it has managed to generate cash flows of Rs 538 crore. This is good sign, as a few quarters ago, most of the real estate companies were facing issues on the cash front. On the debt level also, the scenario seems to be good with a Debt/ Equity ratio of 0.60x.

At the current levels, it has 43 ongoing residential projects aggregating to 17.40 mn sq ft of super built up area. The management has also stated that it will foray into three new geographies - Kochi, Kozhikode and Noida. Plans are being chalked out about entering the Hyderabad markets too.

We feel that considering the factors like improved buyers’ sentiments and repo rate cut leading to lower mortgage cost, their performance is expected to improve further in the coming months. Investors can buy the scrip with a long term horizon.