Sobha Rallies As Fourth Quarter Sales Shake Off Demonetisation Bump

Real estate developer Sobha Ltd.’s shares rose the most in a decade after the company said its sales rebounded from the impact of demonetisation.

The company recorded an 18 percent jump in total volumes in three months ended March. That compares with a decline of 28.3 percent in the previous three months when the government’s currency curbs hurt the cash-intensive real estate sector.

Sobha’s shares hit an upper circuit of 20 percent on Wednesday, but pared some gains to end the day 16.24 percent higher.

The pick-up in sales came on the back of improved consumer sentiment as the impact of the demonetisation waned, JC Sharma, vice-chairman and managing director of the south India-based company, said over the phone.

Average price realisation rose 15 percent in the fourth quarter to Rs 6,980 per square feet on the back of a varied product range across different regions, Sharma said. The National Capital Region saw a four-fold jump in volumes compared to the last quarter, the highest among the nine regions that the company operates in. The region contributed 14 percent to the total sales. Sharma expects prices to remain largely stable in the next few quarters.

Even without any new launches in the fourth quarter, the value of sales rose 35 percent from the last quarter to Rs 505 crore.

In the full financial year 2016-17, the company sold three million square feet at an average price realisation of Rs 6,216 per square feet.

Sobha’s stock has gained more than 60 percent year-to-date. Of the 18 analysts tracking the company, only one has a ‘sell’ rating while two recommend a ‘hold’, according to Bloomberg. The stock is currently trading at Rs 407 apiece, 11 percent higher than Bloomberg’s consensus 12-month target price of Rs 362.