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May 12, 2015

Edelweiss on Sobha

Muted Top-line but EBITDA margins expand

·         Revenue de-grew from INR 627 cr in Q4FY14 to INR 506 cr in Q4FY15, down 19%
·         EBITDA stood at INR  142 cr in Q4FY15 from INR 171 cr in Q4FY14, down 17%
·         EBITDA margins reported an increase of 80 bps from 27.3% in Q4FY14 to 28.1% in Q4FY15
·         PAT stood at INR 62 cr in Q4FY15 from INR 70 cr in Q4FY14, down 12%

Sobha Ltd









Figures in INR crores
Q4 FY15
 Q4 FY14
YoY
Q3 FY15
QoQ
Consensus
Deviation
Edelweiss
Deviation
Net Sales
               506
               627
-19%
               684
-26%
               679
-25%
               640
-21%
EBITDA
               142
               171
-17%
               154
-8%
               160
-11%
               147
-3%
PAT
                 62
                 70
-12%
                 60
3%
                 63
-2%
              62.0
-1%
EBITDA margin
28.1%
27.3%
0.8%
22.5%
5.6%
23.6%
4.5%
23.0%
5.1%
NPM
12.2%
11.2%
1.0%
8.8%
3.4%
9.3%
2.9%
9.7%
2.5%

Conference call highlights:

·         For FY16 Sobha had a topline of INR 2455 cr. Out of INR 2455 cr, INR 796 cr has been recorded by the Contractual and Manufacturing division of Sobha.
·         The turnover was low for the quarter INR 506 cr as the “Silicon Oasis” project could not come under revenue recognition.
·         Other expenses have been low at INR 44 cr due to lower spending on marketing etc which has resulted in expansion in EBITDA margin
·         New Launches for the year stood at 10.55 mn. sq. ft (Sobha’s Share). Additionally, Sobha has 1.41 mn. Sq. ft of space available for sale from completion of existing projects.
·         Total unrecognized revenue at INR 2625 cr from the Real Estate division and INR 876 cr worth of revenues from this shall be coming in FY16.
·         Management has indicated that current demand outlook is unlikely to improve in H1FY16, however expects the market to improve in H2FY16.
·         Pricing scenario is also likely to be under pressure for all markets besides Bangalore. Management has guided for an average realization of INR 6500 per sq. ft for FY16 and for sales of 4 million sq ft in FY16.
·         The debt for FY15 is up by INR 52 cr due to scheduled end payments and capex for projects in Bangalore and Kerala. During the year gearing has increased to 0.75x. However, management expects leverage to come down marginally to 0.7x by FY16, aided by the improvement in volumes in FY16.
·         Average cost of debt has been reduced from 12.7% to 12.6% in the present FY15.
·         Two more projects on the same lines as “Sobha Dream” project in Bangalore are being contemplated. These projects have higher margins vis-à-vis other residential offerings from Sobha.
·         The company has declared a dividend of INR 7 per share.
·         Management has guided that the Collections will increase for FY16 from FY15 in line with increase in volumes.
·         Sobha does not see contractual works from Infosys to be a driving factor for the contractual division going forward.







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