“Premium Housing, Premium Problems”
📦 1. At a Glance
Sobha Limited reported record Q1 sales of ₹2,078 Cr (yes, that’s ₹20.78 Bn). But despite all the launch fireworks, the fundamentals still feel like a cement bag with a small hole. The stock trades at a nosebleed PE of 171x, ROE is a measly 2.68%, and operating margins are stuck at 7%. So, what’s the catch?
🎬 2. Hook: High Sales, Low Profit — How Does That Work?
Sobha’s marketing team must be popping champagne over hitting the ₹2,000 Cr mark. But investors looking under the hood are going…
“Bro, ₹1,240 Cr revenue… ₹41 Cr PAT… PE 171?!”
This isn’t a growth stock. This is a stock in a financial detox, with great launches but weak balance sheet metabolism.
🏗️ 3. WTF Do They Even Do?
- Real Estate (81%): Premium residential projects under the SOBHA brand — with main focus in Bangalore, NCR, Kerala, Chennai.
- Contractual + Manufacturing (19%): They build for others too, and also run backward integrated factories for glazing, interiors, and concrete.
In short: they build homes AND the tiles, kitchen cabinets, and door knobs for them. Vertical integration = full control, but also full cost baggage.
📊 4. Financials – Profit, Margins, ROE, Growth
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | ₹3,310 Cr | ₹3,097 Cr | ₹4,039 Cr |
| EBITDA | ₹370 Cr | ₹277 Cr | ₹294 Cr |
| Net Profit | ₹104 Cr | ₹49 Cr | ₹95 Cr |
| EPS | ₹9.74 | ₹4.59 | ₹8.86 |
| OPM | 11% → 9% → 7% 👎 | ||
| ROE | ~3% | 3% | 2.68% 🔻 |
Yikes. Sales are growing (30% YoY), but profits aren’t. It’s like a treadmill — high effort, no movement.
💸 5. Valuation – Cheap, Meh, or Crack?
| Metric | Value |
|---|---|
| CMP | ₹1,517 |
| Market Cap | ₹16,228 Cr |
| Book Value | ₹427 |
| PE (TTM) | 171x 🚨 |
| P/BV | 3.55x |
📉 Fair Value Range: ₹650 – ₹950
Based on 20–30x normalized EPS (₹22–₹30) in an optimistic FY27
At this price, you’re paying growth stock premium for low-margin real estate.
🧱 6. What’s Cooking – Launches, Deliveries, Drama
✅ Highlights:
- ₹2,078 Cr Q1 Sales – All-time high
- 1.44 mn sq ft sold, Avg Price = ₹14,395/sqft
- Sobha Aurum (Greater Noida): 420 units sold like hot parathas
- Marina One (Kochi): 4 towers launched = 920k sqft
👷♂️ Completions:
- 594 homes delivered in Q1 (1.07 mn sqft)
All this… but net profit for Q1FY26 = ₹41 Cr. 🤯
🧾 7. Balance Sheet – How Much Debt, How Many Dreams?
| Year | Gross Debt | Net Debt | Reserves | D/E Ratio |
|---|---|---|---|---|
| FY23 | ₹2,027 Cr | ₹1,940 Cr | ₹2,419 Cr | 0.74x |
| FY25 | ₹1,183 Cr | Lower, yes — but… | ₹4,454 Cr | D/E improving ✅ |
They’ve reduced debt — big plus.
But working capital days = 138, CCC = 9,841 days 😵
Cash flow is real estate’s Achilles heel — and Sobha’s is in recovery mode.
💵 8. Cash Flow – Sab Number Game Hai
| FY | CFO | CFI | CFF | Net Cash |
|---|---|---|---|---|
| FY23 | ₹1,150 Cr | -₹237 Cr | -₹773 Cr | ₹140 Cr |
| FY25 | ₹200 Cr | -₹1,180 Cr | ₹993 Cr | ₹13 Cr |
→ FY25 = Cash in, cash out, but not much retained.
→ Still better than the -₹166 Cr drain in FY24.
📐 9. Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | 2.68% |
| ROCE | 6.44% |
| OPM | 7.29% |
| Interest Coverage | ~1.5x (low) |
| Debt Reduction | ✅ But needs stronger EBITDA to matter |
🧠 Bottom line: this company needs margin recovery, not just volume growth.
🧾 10. P&L Breakdown – Show Me the Money
Q1FY26 (latest quarter):
- Revenue = ₹1,241 Cr
- OPM = 8%
- EBITDA = ₹94 Cr (est.)
- PAT = ₹41 Cr
- EPS = ₹3.82
Still feels tight for a company with ₹16,000 Cr market cap.
🧩 11. Peer Comparison – Who Else Is in the Game?
| Company | PE | ROE | OPM | Market Cap |
|---|---|---|---|---|
| Sobha | 171x | 2.7% | 7.3% | ₹16,228 Cr |
| Oberoi Realty | 31x | 14.6% | 58.7% | ₹67,634 Cr |
| Brigade | 40x | 14.6% | 27.9% | ₹27,414 Cr |
| DLF | 45x | 11.2% | 26.4% | ₹2,08,882 Cr |
Sobha trades at higher PE than all peers despite the worst ROE.
That is valuation hera-pheri at its finest.
🗃️ 12. Misc – Shareholding, Trends, Promoters
| Stakeholder | FY23 | FY25 |
|---|---|---|
| Promoter | 52.3% | 52.9% |
| FIIs | 15.5% → 8.1% 🔻 | |
| DIIs | 13.7% → 25% 🚀 | |
| Public | Shrinking, now ~13.9% |
✅ DII confidence rising
❌ FII exit visible
📊 Retail thinning = probably too complex to hold long-term
⚖️ 13. EduInvesting Verdict™
Sobha’s problem isn’t brand, demand, or execution. It’s math.
- High costs
- Weak margins
- Low return ratios
- Valuation that assumes it’s DLF + Oberoi + Godrej… all in one
And yet… they delivered 594 homes this quarter, launched new cities, and cleaned up some debt. So there is a long game brewing.
But until ROE rises above 8–10%, this remains a case of “more cement, less sentiment.”
🧮 Fair Value Range: ₹650 – ₹950
(Based on normalised earnings of ₹22–30 over FY26–27 and sector avg. PE of 25–30x)
✍️ Written by Prashant | 📅 July 8, 2025
Tags: Sobha Ltd, Q1FY26 Real Estate Update, Sobha Aurum, Marina One Kochi, High PE Stock, Real Estate Sector India, Bangalore Developer, Debt Reduction, EduInvesting Realty Watch
