Sobha’s launch pipeline and high-margin projects support strong FY27 pre-sales outlook

Investment View

Emkay Research’s September 21, 2026 company update on Sobha retains a BUY recommendation with a target price of Rs 1,900. The broker expects another strong year after the FY26 rebound in pre-sales and believes Sobha can surpass Rs 100 billion of pre-sales in FY27E.

The investment case is supported by a substantial launch pipeline, continued healthy residential absorption in Bengaluru and a prospective recovery in reported profitability as higher-margin projects begin revenue recognition.

Pre-sales Growth and Launch Pipeline

Sobha reported FY26 pre-sales of Rs 81.4 billion, up 30 per cent year on year, following a disappointing FY25. Momentum accelerated in Q1 FY27, when record pre-sales reached Rs 36.6 billion, up 76 per cent year on year.

Emkay forecasts FY27E sales bookings of around Rs 106 billion, representing 30 per cent growth. This is supported by sales volumes of 6.8 million square feet, up 21 per cent, and realisations of Rs 15,862 per square foot, up 8 per cent.

Sobha launched 14.8 million square feet during FY25 and FY26 and is expected to launch approximately 15 million square feet in FY27. A further 8.2 million square feet is in the pipeline across Gurugram, Bengaluru, Chennai, Hyderabad and Thrissur, with gross development value of Rs 120 billion. Two projects with gross development value of Rs 12 billion had already launched in Q2 FY27.

The company held unsold inventory worth Rs 192 billion at the beginning of Q1 FY27. Emkay estimates that even a 25 per cent sell-through of available unsold inventory and new launches could take FY27E pre-sales beyond Rs 100 billion and potentially to Rs 120 billion.

Profitability Outlook

Reported margins are the central monitorable in Emkay’s thesis. EBITDA margin was about 6 per cent in FY26 and Q1 FY27, affected by financial-reporting changes, recognition of low-margin projects and higher sales and marketing costs as operations scaled up.

The ongoing project mix includes more high-margin, including owned, projects with project-level EBITDA margins above 35 per cent. As these projects are expected to be recognised from H2 FY27, Emkay forecasts a material improvement in reported EBITDA margin, potentially reaching 20 per cent in H2 FY27 and improving thereafter.

Bengaluru Market and Key Monitorables

The Bengaluru residential market remains resilient, according to Emkay, although market supply is expected to increase as approval constraints ease. The recently notified Premium FAR policy permits developers to buy additional FAR by paying government charges, which could drive significant new supply, particularly from well-funded Bengaluru developers.

The prospective increase in supply and Sobha’s pace of reported-margin recovery are important factors to monitor.

Valuation

Emkay values Sobha using a sum-of-the-parts approach based on 8 times September 2028 estimated embedded EBITDA for the residential segment. The valuation assumes sales bookings of Rs 116 billion, a 21 per cent embedded EBITDA margin and residential enterprise value of Rs 190.2 billion.

Emkay’s estimated NAV is Rs 1,571 per share. The report’s CMP of Rs 1,216 represented a 23 per cent discount to NAV. The target price of Rs 1,900 implies a 21 per cent premium to NAV and 56.3 per cent upside from the CMP.