Sobha: Demand momentum remains intact. Maintain BUY with a Target Price of Rs 2,459

Sobha (SDL)’s Q3FY26 operational performance reinforces the demand resilience and execution momentum highlighted in our earlier note. SDL reported its highest-ever quarterly pre-sales of INR 21.2bn, representing a 52% YoY and 11% QoQ growth, driven by healthy traction across core markets and strong response to recent launches. SDL’s own share of sales remained elevated at ~86%, enhancing cash flow visibility. Cumulative 9MFY26 pre-sales of INR 60.97bn (+37% YoY) keep the company firmly on track to achieve INR100bn+ pre-sales in FY26, consistent with earlier guidance. Regionally, Bengaluru continued to anchor performance, contributing over 70% of quarterly sales value, supported by strong traction in newly launched projects such as Sobha Magnus (~75% of project sold out). NCR sales were aided by the launch of Sobha Strada, while Kerala delivered steady growth). Importantly, Sobha marked its strategic entry into Mumbai with the launch of Sobha Inizio at Sewri (Parel), expanding its footprint to 13 cities and adding a meaningful long-term growth lever. Overall, Sobha’s Q3FY26 performance further validates the brand-led demand strength, improving realizations, and disciplined execution, reinforcing our constructive stance as the company enters a launch-heavy and potentially record-setting Q4FY26. Consequently, while the broader Bengaluru market may see a slowdown in investor-driven projects, SDL is well-positioned to continue its growth trajectory, leveraging its brand equity to dominate the premium, end-user segment. Sobha seems to be on track with INR 75bn+ new launches in Q4FY26, setting the stage for FY26 pre-sales to cross INR 100bn+. Valuation comfort, strong FCF generation, and likely robust growth are key near-term triggers for further rerating. Given the robust launch pipeline, strong balance sheet, and stable cash flows, we maintain BUY with a TP of INR 2,459/sh.

Robust pre-sales achieved: It is pertinent to note that the Q3FY26 outcome was achieved despite the deferment of key launches, including a ~INR 40bn Noida project and a ~INR 7bn Bengaluru launch, which have now shifted to Q4FY26. If these launches has been on track, quarterly pre-sales could have been materially higher at INR30–35bn. Launch activity is now expected to be meaningfully bunched in Q4FY26, with Bengaluru launches slated for the second half of January, followed by large launches in Noida and Gurgaon (INR35bn+ each) in February 2026, and an additional INR20bn launch in Chennai. This positions Q4FY26 for ~INR40bn in pre-sales, which, when combined with the INR60.97bn already achieved in 9MFY26, makes INR100bn+ FY26 pre-sales achievable.

Well-poised for growth: SDL is expected to clock INR 100bn+ in sales for FY26 (+70% YoY), supported by: 1) a strong launch pipeline in high-growth markets (Bengaluru, NCR, and Pune) and 2) brand-led pricing power and strong execution. While near-term P&L margins may be impacted by CCM accounting, improved execution ramp-up, self-owned land share, and pricing strength should enable embedded profitability in FY26.

Disclaimer : This content is only for informational purpose. Do not make any investment based solely on this recommendation as this recommendation is not based on your unique risk profile and unique investment objectives. Investments in stocks are subject to market risks and other risks. There is no guarantee of the actual return that will be given. 

Source : HDFC Securities Institutional Equities

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