RESULTS REVIEW 2QFY18 13 NOV 2017

Sobha
BUY
INDUSTRY REAL ESTATE In-line performance
CMP (as on 13 Nov 2017) Rs 500 Sobha Developers (SDL) 2QFY18 net profit came in Key highlights
at Rs 503mn. Adjusted for MAT credit of Rs 103mn, In-line performance: SDLs revenue grew 19.5% YoY,
Target Price Rs 572 PAT is Rs 400mn, in-line with our estimate of Rs owing to strong growth in the Real Estate development
Nifty 10,225 432mn. SDL recorded 0.86mn sq ft of pre-sales for business (+36.3% YoY), but was partly negated by a
decline in the Contracting segment (-13.6% YoY).
Sensex 33,034 2QFY18, with pre-sales value at Rs 7.8bn (SDL share
EBIDTA margin expanded 19bps YoY to 19.3%. Despite
KEY STOCK DATA Rs 5.9bn). Cost of funds reduced to 9.88% QoQ. better contribution from the high-margin realty
Bloomberg SOBHA IN segment (76.3% vs 67.1% YoY), EBIDTA margins
Net D/E increased from 0.75x to 0.84x QoQ. Net debt
No. of Shares (mn) 96 remained muted.
stood at Rs 22.8bn (+Rs 2,584mn QoQ). This was on
MCap (Rs bn) / ($ mn) 48/736
account of lands payment of Rs 2.8bn. Customer Net D/E at 0.84x, capex pick-up key headwind: SDL
6m avg traded value (Rs mn) 153 incurred Rs 131mn capex on commercial assets during
collection stood at Rs 6.9bn for 2QFY18 in line with 1HFY18 vs Rs 83mn during 1HFY17. Going forward, SDL
STOCK PERFORMANCE (%)
1QFY18, at Rs 7.3bn. may step up APMC capex (from FY19E). During
52 Week high / low Rs 555/223
2QFY18, land payments witnessed a steep jump to Rs
3M 6M 12M Despite higher contribution from the Real Estate
2.8bn (2QFY17- Rs 503mn) for lands in Kochi.
Absolute (%) 34.9 22.7 101.9 business (76.3% vs 67.1% YoY), EBIDTA margins
Near-term outlook: Though the underlying real estate
Relative (%) 29.1 13.3 78.7 remained muted. SDL is sitting on 15mn sq ft of market still remains dull, organised players like SDL
SHAREHOLDING PATTERN (%) unsold inventory and pre-sales acceleration is key for may benefit from the shift in market share from the
Promoters 56.08 further re-rating. Maintain BUY with an increased unorganised to organised sector. We remain
FIs & Local MFs 10.70 NAV of Rs 572/share. constructive.
FPIs 28.72
Public & Others 4.50 Financial Summary*
Source : BSE (Rs mn) 2QFY18 2QFY17 YoY (%) 1QFY18 QoQ (%) FY17 FY18E FY19E FY20E
Net Sales 6,466 5,411 19.5 6,789 (4.8) 22,462 25,713 27,407 31,624
Parikshit Kandpal EBITDA 1,248 1,034 20.7 1,215 2.7 4,199 4,928 5,331 6,009
parikshitd.kandpal@hdfcsec.com APAT 503 384 31.0 477 5.5 1,667 1,886 2,136 2,569
+91-22-6171-7317 Diluted EPS (Rs) 5.2 4.0 31.0 5.0 5.5 17.3 19.6 22.2 26.7
P/E (x) 28.9 25.5 22.5 18.7
Kunal Bhandari EV / EBITDA (x) 16.4 14.4 13.2 11.8
kunal.bhandari@hdfcsec.com RoE (%) 5.2 6.4 6.9 7.9
+91-22-6171-7319 Source: Company, HDFC sec Inst Research, * Consolidated
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
 SOBHA: RESULTS REVIEW 2QFY18

Revenue, EBIDTA and net Quarterly Financial Snapshot (Consolidated)

profit grew 19.5%, 20.7% and Particulars 2QFY18 2QFY17 YoY (%) 1QFY18 QoQ (%) 1HFY18 1HFY17 YoY (%)
31% YoY, ahead of our Net Sales 6,466 5,411 19.5 6,789 (4.8) 13,255 11,108 19.3
estimates by 5.2%, 9.4% and Material Expenses (3,869) (3,126) 23.8 (4,016) (3.7) (7,885) (6,451) 22.2
16.4% respectively Employee Expenses (495) (452) 9.5 (491) 0.8 (986) (915) 7.8
Other Operating Expenses (854) (799) 6.9 (1,067) (20.0) (1,921) (1,776) 8.2
EBITDA margins expanded
EBITDA 1,248 1,034 20.7 1,215 2.7 2,463 1,966 25.3
19bps YoY to 19.3%. Material
Interest Cost (513) (379) 35.4 (449) 14.3 (962) (736) 30.7
expenses increased 206bps
Depreciation (137) (154) (11.0) (135) 1.5 (272) (308) (11.7)
YoY. This was partly negated
by 70/156bps reduction in Other Income 112 111 0.9 97 15.5 209 232 (9.9)
employee costs and other PBT 710 612 16.0 728 (2.5) 1,438 1,154 24.6
expenses Share of profits from jointly controlled
- 33 - - - - 51
entity
Tax (207) (261) (20.7) (251) (17.5) (458) (462) (0.9)
Despite higher contribution
RPAT 503 384 31.0 477 5.5 980 743 31.9
from the real estate business
Source: Company, HDFC sec Inst Research
(76.3% vs 67.1% YoY),
EBIDTA margins remained Margin Analysis (Consolidated)
muted. Adjusted for MARGIN ANALYSIS 2QFY18 2QFY17 YoY (bps) 1QFY18 QoQ (bps) 1HFY18 1HFY17 YoY (bps)
contractual margins, SDL real Material Expenses % Net Sales 59.8 57.8 206 59.2 68 59.5 58.1 141
estate EBIDTA margins Employee Expenses % Net Sales 7.7 8.4 -70 7.2 42 7.4 8.2 -80
(muted) stood at 20.6% vs Other Operating Expenses % Net Sales 13.2 14.8 -156 15.7 -251 14.5 16.0 -150
21.2% YoY EBITDA Margin (%) 19.3 19.1 19 17.9 140 18.6 17.7 88
Tax Rate (%) 29.2 42.6 -1,349 34.5 -532 31.8 40.0 -818
SDL recorded 0.86mn sq ft of APAT Margin (%) 7.8 7.1 68 7.0 75 7.4 6.7 70
Source: Company, HDFC sec Inst Research
pre-sales for 2QFY18, with
pre-sales value of Rs 7.8bn Pre-sales Trend
(SDL share at Rs 5.9bn). Cost Pre-sales trend 2QFY18 2QFY17 YoY (%) 1QFY18 QoQ (%) 1HFY18 1HFY17 YoY (%)
of funds reduced to 9.88% vs Sales Volume (mn sq ft) 0.9 0.9 0.6 0.8 5.6 1.7 1.7 0.7
10.06% QoQ Sales Value (Rs mn) 5,927 5,182 14.4 5,628 5.3 11,554 9,880 16.9
Average Realization (Rs/sq ft) 6,883 6,056 13.7 6,903 (0.3) 6,892 5,934 16.1
Source: Company, HDFC sec Inst Research

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 SOBHA: RESULTS REVIEW 2QFY18

Net D/E increased from Worst-case scenario: Consolidated net D/E peaks at 0.84x
0.75x to 0.84x QoQ. Net Net D/E increased from 0.75x to 0.84x QoQ. Net debt during FY19E, as the construction of APMC projects
debt stood at Rs 22.83bn stood at Rs 22.83bn (+Rs 2,584mn QoQ). This was on pick up.
(+Rs 2,584mn QoQ). This account of land payment of Rs 2,794mn. Customer
collection stood at Rs 6.9bn for 2QFY18, in-line with While we remain cautious on rising debt levels, we
was on account of land expect SDL to monetize the non-core land bank to fund
payment of Rs 2,794mn. 1QFY18 at Rs 7.3bn.
the Capex of the APMC project. SDL may not have
Customer collection stood With an outlay of Rs 10bn expected for the APMC near-term liquidity concerns, as cash flows from real
at Rs 6.9bn for 2QFY18 in commercial project, net debt may increase further. Net estate/contractual business continue to be robust.
line with 1QFY18 at Rs D/E may remain stable in the 0.7-0.8x range. In-line
7.3bn with SDLs lean Capex guidance, the company incurred We expect consolidated gross debt to stabilize at the
Capex of Rs 180mn on commercial assets during FY17 current level of Rs 24.3bn by FY20E. Net D/E will peak
and Rs 131mn in 1HFY18. The Capex may step up at 0.9 xs in a worst-case scenario.
Cost of debt has been Debt/Equity Ratio Trend (X) (Consolidated)
coming down for SDL, and (Rs mn) 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18
stands at 9.88% as of end- Net debt (Rs mn) 18,130 20,300 20,968 20,666 20,604 20,250 20,602 20,838 20,736 20,247 22,832
2QFY18, a reduction of Net D/E (x) 0.75 0.82 0.83 0.81 0.8 0.78 0.81 0.80 0.78 0.75 0.84
138bps YoY Cost of Debt % 12.6 12.5 12.14 11.98 11.83 11.58 11.26 10.99 10.42 10.06 9.88
Source: Company, HDFC sec Inst Research

Customer collections decline

SDLs customer collections from Real Estate Collection demand will be higher for mid-cycle
development have declined in 2QFY18, and stand at Rs projects. This will alleviate pressure on the balance
4.30bn. The contractual segment witnessed an sheet and induce deleveraging.
increase in collections at ~Rs 2.6bn.
Further, new launches will also support acceleration in
Despite the slowing down of new launches, the customer collections, albeit at a slower pace. Demand
strategy to monetise existing inventory may result in for customer advances?? is ~15-20%, within three
SDLs customer collections customer collections remaining largely stable. months of a new project launch.
from real estate Customer Collections
development have declined (Rs mn) 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18
in 2QFY18, and stand at Rs
Real Estate 3,924 3,238 4,134 4,021 3,964 4,131 4,907 4,331 4,860 5,740 4,330
4.30bn. The contractual
Contractual 2,084 1,671 1,987 1,691 1,833 1,677 1,705 1,849 2,090 1,560 2,600
segment witnessed an
increase in collections to Total 6,008 4,909 6,121 5,712 5,797 5,808 6,612 6,180 6,950 7,300 6,930
Source: Company, HDFC sec Inst Research
~Rs 2.6bn.

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 SOBHA: RESULTS REVIEW 2QFY18

Key Assumptions And Estimates

Expect marginal volume
growth owing to (1) Delay Summary Of Key Assumptions And Estimates
in Kochi and Chennai Estimates Growth (%)
Comments
FY18E FY19E FY20E FY18E FY19E FY20E
launches (2) Longish sales
Volume assumptions
cycle in existing high-value Expect marginal volume uptick on (1) Delay in Kochi &
unsold inventory of ~15mn Chennai launches (2) Longish sales cycle in existing
sqft and (3) Slower demand Residential (mn sqft) 3.4 3.6 4.0 14.7 5.4 9.6
high-value unsold inventory of ~15mn sqft and (3)
Absolute realisation to Slower demand are key contributing factors.
remain flattish. Product mix Total 3.4 3.6 4.0 14.7 5.4 9.6
is the key driver of YoY Realisation
Absolute realisation to remain flattish. Sharp jump on
growth Residential (Rs/sqft) 7,565 7,893 7,786 25.4 4.3 (1.4)
account of change in product mix.
Pre-sales
Slower pre-sales velocity Rs mn 26,046 28,629 30,949 43.8 9.9 8.1 Pre-sales to see gradual pickup
and Unrecognized revenue Earnings forecast
of (Rs 28.7bn, 3yrs time to Slower pre-sales velocity and unrecognised revenue of
completion) to result in (Rs 28.7bn, 3yrs time for completion) why bracket to
Sales (Rs mn) 18,415 19,744 24,327 23.7 7.2 23.2
result in back-ended revenue growth. Pre-sales
back ended revenue acceleration is necessary to deliver growth
growth. Pre-sale Flattish growth in contracting business as Infosys
Contractual 7,298 7,663 7,297 (3.7) 5.0 (4.8)
acceleration necessary to business decreasing.
deliver growth Total 25,713 27,407 31,624 14.5 6.6 15.4 FY18-20E revenue CAGR at 10.9%.

EBIDTA Real Estate (Rs

3,833 4,182 4,914 25.2 9.1 17.5 13.2% FY18-20E EBIDTA CAGR
mn)
SDL to report blended De-growth in contracting EBIDTA, as non-Infosys
EBIDTA margins of 19-20% EBIDTA Contract (Rs mn) 1,095 1,150 1,095 (3.7) 5.0 (4.8)
business has about 200bps lower EBIDTA margins.
Total EBIDTA (Rs mn) 4,928 5,331 6,009 17.4 8.2 12.7 10.4% FY18-20E EBIDTA CAGR.
EBIDTA margin Real
20.8 21.2 20.2 24.2 36.5 (97.8)
Estate(%)
EBIDTA margin
15.0 15.0 15.0 - - -
Contract(%)
EBIDTA Margin (%) 19.2 19.5 19.0 47.1 28.8 (45.1) Change in mix to drive EBIDTA margins.

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 SOBHA: RESULTS REVIEW 2QFY18

Estimates Growth (%) Comments

16.7% FY18-20E PAT CAGR FY18E FY19E FY20E FY18E FY19E FY20E
Interest to increase, as debt may inch up on account of
Net interest expense* 2,034 2,099 2,127 35.9 3.2 1.3 APMC capex and payment for Kochi land to
Puravankara.
Average interest cost lower, as we build in 30% interest
Avg. interest rate (%) 8.7 8.7 8.9 194.0 0.0 11.5
cost capitalisation
PAT (Rs mn) 1,886 2,136 2,569 13.1 13.3 20.3 16.7% FY18-20E PAT CAGR
PAT Margin (%) 7.3 7.8 8.1 (8.6) 46.1 32.9 Change in PAT margins in-line with overall estimates.
EPS (Rs) 19.6 22.2 26.7 13.1 13.3 20.3
Source: Company, HDFC sec Inst Research

Strong cash flows from

Cash Flow Forecast
operations to be spent on Estimates Comments
land acquisition, Rs 10bn Rs mn
FY18E FY19E FY20E
capex on APMC project and
Cash flows forecast
interest payment
CFO ( a) 372 5,076 5,861
Capex of Rs 10bn to be incurred on the
CFI (b) (392) (1,880) (3,427)
APMC project over 3-4 years
Cash flow shortfall to be FCF (a+b) (19) 3,195 2,434 Strong cash flow recovery during FY17-19E
made up with higher Interest outflow to impact cash flow
CFF (c) 66 (3,251) (2,152)
borrowings. We expect net negatively
D/E to reduce to 0.7x during The net change in cash doesnt impact the
Total change in cash (a+b+c) 47 (56) 282
FY20E debt position materially
Source: Company, HDFC sec Inst Research

We have incorporated Change In Estimates

changes in our estimates to FY18E FY19E
factor in marginal Particulars
New Old % Change New Old % Change
contraction in EBIDTA Revenues (Rs mn) 25,713 24,820 3.6 27,407 27,407 (0.0)
margins and higher interest EBITDA (Rs mn) 4,928 5,389 (8.6) 5,331 6,000 (11.1)
expense on the back of APAT (Rs mn) 1,886 2,038 (7.5) 2,136 2,429 (12.1)
increase in debt EPS (Rs) 19.6 20.8 (7.5) 22.2 24.8 (12.1)
Source: Company, HDFC sec Inst Research

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 SOBHA: RESULTS REVIEW 2QFY18

We value the real estate Valuation: Increase NAV target to Rs 572/sh

business at Rs 210/share,
future developable land SoTP valuation
bank at Rs 441/share, We maintain BUY on SDL, with an increased SOTP- 30% earlier to 20% vs market rates now, and (3)
contracting and based target price of Rs 572/share. We value the real Lower unpaid land bank. We dont assign any NAV
manufacturing business estate business at Rs 210/share, future developable discount to SDL, as we have only valued the projects
(C&M) at Rs 79/share, land bank at Rs 441/share, contracting and that have visibility over the next five years. For the
rental assets at Rs 35/share, manufacturing business (C&M) at Rs 79/share, rental land bank beyond that period, we ascribed the current
assets at Rs 35/share, refundable deposits at Rs market value.
refundable deposits at Rs
43/share to arrive at a gross 43/share to arrive at a gross NAV of Rs 808/share. We have also incorporated the valuation of SDLs
From the gross NAV, we deduct the net debt (Rs upcoming APMC commercial project. This project
NAV of Rs 808/share.
227/share) and unpaid land bank value (Rs 9/share), to envisages a Rs 10bn outlay for developing ~2.8mn sq ft
arrive at Rs 572/share as our NAV-based target price. lease area (~0.7mn sqft will be handed over to APMC).
Increase in our NAV is largely on account of (1) Roll SDL will be leasing 2.1mn sq ft at an average rate of
forward of valuation to FY19E (2) Increase in land ~Rs 50/sq ft/month. The work is taking place, albeit
From the gross NAV, we
value as we have reduced land bank discount from slowly, and serious outlay will only start late FY19E.
deduct the net debt (Rs
227/share) and unpaid land
Sum Of The Parts
bank value (Rs 9/share), to
New - Old - Change
arrive at Rs 572/share as Rs mn
Rs/share Rs/share (Rs/sh)
Comments
our NAV-based target price Gross NAV Residential 20,624 210 206 4 DCF-based NAV.
Land Bank 43,200 441 414 27 At current market price
Contractual/Manufacturing 7,750 79 56 23 At 7x FY19E EV/EBIDTA
Increase in our NAV is Rental assets/APMC 3,433 35 25 10 Discounting at 12% cap rate viz. school, hospital etc
largely on account of (1) Refundable JDA Deposits 4,182 43 43 - Balance sheet number
Roll forward of valuation to Total Gross NAV 79,189 808 744 64
FY19E (2) Increase in land Less net debt (22,260) (227) (218) (9) Net debt as on March 2019E
value, as we have reduced Unpaid land cost (844) (9) (26) 17
land bank discount from NAV 56,085 572 500 72
30% earlier to 20% vs Source: Company, HDFC sec Inst Research
market rates now, and (3)
Lower unpaid land bank

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 SOBHA: RESULTS REVIEW 2QFY18

Real estate development: NAV calculation Key valuation assumptions

methodology
In the exhibit below, we highlight our sales and cost
We have divided SDLs entire land bank into current inflation forecasts. We expect property prices to
and future developments (based on information from appreciate in-line with WPI inflation, i.e. 5%, and the
the company). cost of construction to grow at 6%. We forecast other
costs including marketing, SGA and employee cost at
We have arrived at the sales price/sq ft and the 5% of sales.
anticipated sales volumes for each project, based on
our discussions with industry experts. Base Case Assumptions (%)
Discount rate 16.1
We have deducted the cost of construction, based on Annual rate of inflation-sales price 5
our assumed cost estimates, which have been arrived Annual rate of inflation-cost of construction 6
at after discussions with industry experts. Other costs marketing, SGA, employee cost (as
5
% of sales)
We have further deducted marketing and other costs, Tax rate (%) 33
which have been assumed at 5% of the sales revenue. Source: Company, HDFC sec Inst Research

We have then deducted income tax, based on the tax In the exhibit below, we highlight our sales price and
applicable for the project. construction cost forecasts. Our pricing assumptions
are at 10-20% discount to the currently prevailing
The resultant cash inflows at the project level have prices.
Our base property price
been discounted, based on WACC of 15% (cost of
assumption is at a 10-20% equity 20.1% based on beta of 1.9, cost of debt 13% Base Price And Construction Cost Assumptions
discount to current prices in and debt/equity ratio of 0.45x). All the project-level Prices Cost
Location
SDLs key macro markets NAVs have been summed up to arrive at the NAV of Rs/sq ft Rs/sq ft
the company. Bangalore 5,500 2,400
Mysore 3,700 1,800
In case of a future land bank, we have valued at 20% Pune 4,800 2,200
discount to current prices, and not taken into account Chennai 4,900 2,200
construction margins. Kochi 6,500 3,000
Hosur 4,500 1,800
For annuity income-generating assets, we have valued Thrissur 4,500 2,200
cash flows at a cap rate of 12%. Coimbatore 4,400 2,200
Gurgaon 7,500 3,425
From the NAV, we have deducted the net debt as of Calicut 4,500 1,800
FY19E, to arrive at the final valuation of the company. Source: Company, HDFC sec Inst Research

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 SOBHA: RESULTS REVIEW 2QFY18

1% increase in average
NAV sensitivity analysis
base sales price impacts Sensitivity to our assumption of property prices Sensitivity of NAV to changes in cost inflation
our NAV positively by 2.5% Our model is sensitive to changes in the assumptions In our base case, we have assumed cost inflation to be
regarding property prices. For every 1% change in the 6%. For every 100bps increase in construction cost
base property prices, the NAV will change by inflation, the NAV will change by approximately 12.1%.
Every 100bps increase in approximately 2.5%.
NAV Sensitivity To Change In Cost Inflation
sales price inflation impacts
NAV Sensitivity To Change In Average Sale Price Cost inflation rates (%) 4 5 6 7 8
our NAV positively by % change in sale
(10) (5) 0 5 10 NAV/share (Rs) 691 637 572 503 432
20.4% price Change in NAV (%) 20.8 11.3 - (12.1) (24.4)
NAV/share (Rs) 421 499 572 646 724 Source: Company, HDFC sec Inst Research
Change in NAV (%) (26.4) (12.9) - 12.8 26.5
The combined impact of a 100bps increase in sales price
Source: Company, HDFC sec Inst Research
100bps increase in cost inflation and cost inflation will be an increase in NAV of
Sensitivity of NAV to changes in sales inflation 8.3%.
inputs decreases our NAV
by 12.1% In our base case, we have assumed an annual sales Sensitivity of NAV to changes in discount rate
price inflation of 5%. For every 100bps increase in the
annual sale price inflation, the NAV will increase by In our base case, we have assumed a discount rate of
100bps increase in approximately 20.4%. 15%. For every 100bps increase in the discount rate,
discounting rate impacts NAV will fall by 4.7%.
NAV Sensitivity To Change In Sales Inflation
our NAV negatively by 4.7% Sales inflation NAV Sensitivity To Change In WACC
3 4 5 6 7 WACC rates (%) 13 14 15 16 17
rates (%)
NAV/share (Rs) 361 465 572 689 819 NAV/share (Rs) 629 600 572 546 522
Change in NAV (%) (37.0) (18.8) - 20.4 43.0 Change in NAV (%) 10.0 4.9 - (4.7) (8.8)
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

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 SOBHA: RESULTS REVIEW 2QFY18

Income Statement (Consolidated) Balance Sheet (Consolidated)

Y/E March (Rs mn) FY16 FY17 FY18E FY19E FY20E Y/E March (Rs mn) FY16 FY17 FY18E FY19E FY20E
Net Sales 19,566 22,462 25,713 27,407 31,624 SOURCES OF FUNDS
Growth (%) (19.8) 14.8 14.5 6.6 15.4 Share Capital 981 963 963 963 963
Material Expenses 10,243 13,190 15,257 16,594 19,751 Reserves 24,667 25,482 27,367 28,952 30,896
Employee Expenses 1,762 1,779 2,186 2,330 2,694 Total Shareholders Funds 25,648 26,445 28,330 29,915 31,859
Other Operating Expenses 3,131 3,294 3,343 3,152 3,170 Minority Interest - - - - -
EBIDTA 4,429 4,199 4,928 5,331 6,009 Long Term Debt 20,586 22,219 24,319 23,719 24,319
EBIDTA (%) 22.6 18.7 19.2 19.5 19.0 Short Term Debt 1,216 - - - -
EBIDTA Growth (%) (28.2) (5.2) 17.4 8.2 12.7 Total Debt 21,803 22,219 24,319 23,719 24,319
Other Income 343 386 405 416 408 Deferred Taxes 2,361 2,684 2,684 2,684 2,684
Depreciation 597 638 540 504 486 Long Term Provisions & Others 249 163 163 163 163
EBIT 4,175 3,947 4,793 5,243 5,931 TOTAL SOURCES OF FUNDS 50,062 51,511 55,497 56,482 59,026
Interest 1,637 1,497 2,034 2,099 2,127 APPLICATION OF FUNDS
PBT 2,539 2,450 2,759 3,143 3,804 Net Block 3,729 3,173 3,131 3,127 3,141
Tax 1,188 970 938 1,069 1,293 CWIP 454 799 799 2,299 5,299
PAT 1,350 1,480 1,821 2,075 2,511 Goodwill - - - - -
Share of profits 30 129 65 61 58 Investments, LT Loans &
293.9 0.2 0.2 0.2 0.2
EO items (net of tax) 89 58 - - - Advances
APAT 1,469 1,667 1,886 2,136 2,569 Investment Property 1,997.0 1,979.5 2,276 2,572 2,907
APAT Growth (%) (38.3) 13.4 13.1 13.3 20.3 Other Non Current Assets 4,888.3 4,860.0 5,103 5,333 5,455
EPS 15.0 17.3 19.6 22.2 26.7 Inventories 42,649 50,960 52,250 53,647 54,112
EPS Growth (%) (38.3) 15.5 13.1 13.3 20.3 Debtors 2,522 2,267 2,818 3,004 3,474
Source: Company, HDFC sec Inst Research Cash & Equivalents 1,185 1,468 1,515 1,460 1,742
ST Loans & Advances, Others 22,906 23,423 25,373 27,023 27,973
Total Current Assets 69,262 78,118 81,957 85,134 87,300
Creditors 3,182 7,693 8,078 8,320 8,820
Other Current Liabilities & Provns 27,380 29,726 29,692 33,663 36,258
Total Current Liabilities 30,563 37,419 37,770 41,984 45,077
Net Current Assets 38,699 40,699 44,187 43,150 42,223
Misc Expenses & Others - - - - -
TOTAL APPLICATION OF FUNDS 50,062 51,511 55,497 56,482 59,026
Source: Company, HDFC sec Inst Research

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 SOBHA: RESULTS REVIEW 2QFY18

Cash Flow (Consolidated) Key Ratios (Consolidated)

Y/E March (Rs mn) FY16 FY17 FY18E FY19E FY20E FY16 FY17 FY18E FY19E FY20E
PBT before minority 2,539 2,449 2,759 3,143 3,804 PROFITABILITY (%)
Non-operating & EO items (245) (326) (341) (354) (349) GPM 47.6 41.3 40.7 39.5 37.5
Taxes (617) (679) (938) (1,069) (1,293) EBITDA Margin 22.6 18.7 19.2 19.5 19.0
Interest expenses 1,459 1,327 2,034 2,099 2,127 APAT Margin 7.5 7.4 7.3 7.8 8.1
Depreciation 597 638 540 504 486 RoE 5.3 5.2 6.4 6.9 7.9
Working Capital Change 151 130 (3,682) 752 1,087 Core RoCE 8.7 7.8 9.0 9.4 10.3
OPERATING CASH FLOW ( a ) 3,884 3,539 372 5,076 5,861 RoCE 8.7 7.8 9.0 9.4 10.3
Capex (1,076) (316) (500) (2,000) (3,500) EFFICIENCY
Free cash flow (FCF) 2,808 3,223 (128) 3,076 2,361 Tax Rate (%) 46.8 39.6 34.0 34.0 34.0
Investments (1,841) (199) (297) (296) (334) Asset Turnover (x) 0.4 0.4 0.5 0.5 0.5
Others 467 534 405 416 408 Inventory (days) 652 761 733 705 622
INVESTING CASH FLOW ( b ) (2,451) 20 (392) (1,880) (3,427) Debtors (days) 49 39 36 39 37
Share capital Issuance - (582) - - - Payables (days) 74 88 112 109 99
Debt Issuance 1,964 (40) 2,100 (600) 600 Cash Conversion Cycle (days) 627 711 657 635 560
Interest expenses (2,464) (2,602) (2,034) (2,099) (2,127) Debt/EBITDA (x) 4.9 5.3 4.9 4.4 4.0
Dividend (827) (232) - (552) (625) Net D/E 0.8 0.8 0.8 0.7 0.7
FINANCING CASH FLOW ( c ) (1,327) (3,455) 66 (3,251) (2,152) Interest Coverage 2.6 2.6 2.4 2.5 2.8
NET CASH FLOW (a+b+c) 106 103 47 (56) 282 PER SHARE DATA
Closing Cash & Equivalents 1,185 1,468 1,515 1,460 1,742 EPS (Rs/sh) 15.0 17.3 19.6 22.2 26.7
Source: Company, HDFC sec Inst Research CEPS (Rs/sh) 21.1 23.9 25.2 27.4 31.7
DPS (Rs/sh) 7.0 2.0 0.0 4.8 5.4
BV (Rs/sh) 261.5 274.6 294.2 310.6 330.8
VALUATION
P/E 33.4 28.9 25.5 22.5 18.7
P/BV 1.9 1.8 1.7 1.6 1.5
EV/EBITDA 15.7 16.4 14.4 13.2 11.8
OCF/EV (%) 5.6 5.1 0.5 7.2 8.3
FCF/EV (%) 4.0 4.7 (0.2) 4.4 3.3
FCFE/Market Cap 9.7 6.6 4.1 5.1 6.1
Dividend Yield (%) 1.4 0.4 0.0 1.0 1.1
Source: Company, HDFC sec Inst Research

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 SOBHA: RESULTS REVIEW 2QFY18

RECOMMENDATION HISTORY
Sobha TP Date CMP Reco Target
650 10-Feb-17 281 BUY 381
600 13-Apr-17 378 NEU 381
550 17-May-17 421 BUY 500
500
8-Aug-17 384 BUY 500
450
11-Oct-17 421 BUY 500
400
13-Nov-17 500 BUY 572
350
300
250
Rating Definitions
200
150 BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Dec-16

Oct-17
Aug-17
Apr-17
Nov-16

Jan-17

Nov-17
Feb-17

Sep-17
May-17

Jun-17

Jul-17
Mar-17

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 SOBHA: RESULTS REVIEW 2QFY18

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 SOBHA: RESULTS REVIEW 2QFY18

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Institutional Equities
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