Looking for growth? Don't miss Sobha Developers with its track record of fast growth

29-05-2014 • About Sobha Developers ($SOBHA) • By InTwits

Sobha Developers is a growth stock in Realty industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.

Growth story

Sobha Developers showed fast growth in the last financial year. Sobha Developers's revenue surged on 16.6% in FY2014. EBITDA also increased: 10.1% for the same period.

In the last 3 years Sobha Developers showed fast revenue growth of 15.9% from FY2011 to FY2014 annually. EBITDA surged on 19.1% from FY2011 to FY2014 annually.

Sobha Developers ($SOBHA) financials for the last 5 years

mln. INR	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	30,898	13,945	14,079	18,645	21,734
Revenue growth, %		-54.9%	1.0%	32.4%	16.6%
Gross margin, %	43.7%
SG&A, %
EBITDA	2,736	3,659	4,731	5,610	6,174
EBITDA growth, %		33.8%	29.3%	18.6%	10.1%
EBITDA margin, %	8.85%	26.2%	33.6%	30.1%	28.4%
Net Income	1,341	1,813	2,060	2,215	2,350
Net Income margin, %	4.34%	13.0%	14.6%	11.9%	10.8%

CAPEX	139	218	1,021	877	1,197
CAPEX/Revenue, %	0.451%	1.56%	7.25%	4.71%	5.51%
Debt	14,889	3,272	2,218	13,787	14,044
Cash	460	179	415	573	801
Net Debt/EBITDA	5.3x	0.8x	0.4x	2.4x	2.1x

ROIC, %	7.7%	12.4%	18.8%	16.7%	14.6%
ROE, %	9.6%	10.2%	10.7%	10.7%	10.6%

Profitability and return on investment

Despite revenue growth EBITDA margin declined slightly from 30.1% in FY2013 to 28.4% in FY2014. In the longer period the company showed EBITDA margin growth of 2.20 pp from 26.2% in FY2011 to 28.4% in FY2014.

We call Sobha Developers an attractive growth stock as together with the growth it delivers high ROIC at 14.6%. Three years ago it was a bit lower at 12.4%. For the last three years the average ROIC was 16.7%.

Net Income margin decreased on 1.10 pp from 11.9% to 10.8% in FY2014. In the longer period Net Income margin dropped on 2.20 pp from 13% in FY2011 to 10.8% in FY2014.

Sobha Developers operates at ROE of 10.6%. For the last three years the average ROE was 10.7%.

Capital expenditures (CAPEX)

To fuel this fast growth Sobha Developers had to invest in CAPEX.In FY2014 the company had CAPEX/Revenue of 5.51%. The company's CAPEX/Revenue surged on 3.95 pp from 1.56% in FY2011 to 5.51% in FY2014. It's average level of CAPEX/Revenue for the last three years was 5.82%.

Leverage (Debt)

Having such a fast growth profile Sobha Developers keeps medium debt level at 2.1x Net Debt/EBITDA. If we look for the longer period leverage surged on 1.30x from 0.85x in FY2011 to 2.14x in FY2014.

Peers in Realty

Below we provide Sobha Developers benchmarking against other companies in Realty industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Poddar Developers ($PODDARDEV)		-82.6%	-18.4%	63.9%	152.9%
Lancor Holdings ($LANCORHOL)		16.6%	-47.4%	-23.9%	74.0%
Arihant Superstructures ($ASL)		-13.9%	-36.5%	9.1%	42.0%
Godrej Properties ($GODREJPROP)		-80.4%	70.6%	34.7%	13.7%
Brigade Enterprises ($BRIGADE)		-68.8%	27.2%	34.2%	10.2%

Median (11 companies)		-51.5%	14.6%	9.1%	5.4%
Sobha Developers ($SOBHA)		-54.9%	1.0%	32.4%	16.6%

Top companies by Gross margin, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Godrej Properties ($GODREJPROP)	5.4%	28.2%	24.9%	33.3%	28.9%

Median (1 company)	5.4%	28.2%	24.9%	33.3%	28.9%

Top companies by EBITDA margin, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Oberoi Realty ($OBEROIRLTY)	43.7%	58.7%	59.3%	58.9%	54.5%
Lancor Holdings ($LANCORHOL)	19.4%	28.4%	31.1%	35.1%	38.6%
Puravankara Projects ($PURVA)	8.5%	48.9%	48.2%	47.1%	36.5%
Brigade Enterprises ($BRIGADE)	2.7%	35.2%	23.9%	25.9%	33.0%
Ajmera Realty & Infra India ($AJMERA)	7.6%	25.3%	19.2%	26.6%	29.0%

Median (11 companies)	5.7%	25.3%	20.5%	26.6%	24.3%
Sobha Developers ($SOBHA)	8.9%	26.2%	33.6%	30.1%	28.4%

Top companies by CAPEX/Revenue, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Brigade Enterprises ($BRIGADE)	18.5%	42.6%	45.7%	10.7%	17.0%
Oberoi Realty ($OBEROIRLTY)	15.4%	18.6%	32.5%	11.3%	6.0%
Godrej Properties ($GODREJPROP)	0.3%	5.3%	2.8%	2.0%	5.2%
Mahindra Lifespace Developers ($MAHLIFE)	1.1%	4.6%	1.0%	3.6%	4.3%
Vascon Engineers ($VASCONEQ)	2.1%	4.6%	1.2%	2.2%	3.7%

Median (9 companies)	0.4%	5.3%	2.8%	3.6%	3.7%
Sobha Developers ($SOBHA)	0.5%	1.6%	7.3%	4.7%	5.5%

Top companies by ROIC, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Lancor Holdings ($LANCORHOL)	23.5%	38.2%	18.0%	11.6%	19.5%
Poddar Developers ($PODDARDEV)	-1.3%	4.1%	3.9%	2.6%	12.9%
Puravankara Projects ($PURVA)	7.0%	11.2%	13.3%	17.0%	12.3%
Arihant Superstructures ($ASL)		20.2%	12.2%	4.9%	10.6%
Oberoi Realty ($OBEROIRLTY)	28.0%	21.3%	12.9%	14.8%	9.4%

Median (12 companies)	6.9%	8.9%	6.6%	6.2%	9.3%
Sobha Developers ($SOBHA)	7.7%	12.4%	18.8%	16.7%	14.6%

Top companies by Net Debt / EBITDA

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Vascon Engineers ($VASCONEQ)	1.9x	2.8x	8.4x	11.2x	25.9x
Ajmera Realty & Infra India ($AJMERA)	7.7x	2.8x	4.5x	10.7x	13.8x
Mahindra Lifespace Developers ($MAHLIFE)	3.5x	1.8x	1.9x	2.7x	6.9x
Arihant Superstructures ($ASL)	-0.2x	4.5x	4.0x	15.6x	6.1x
Godrej Properties ($GODREJPROP)	7.6x	8.6x	11.8x	5.7x	6.0x

Median (10 companies)	4.1x	3.2x	3.6x	4.8x	4.7x
Sobha Developers ($SOBHA)	5.3x	0.8x	0.4x	2.4x	2.1x

Sobha Developers stock price chart

Sobha Developers financials

mln.	FY2010	FY2011	FY2012

Revenue	30,898	13,945	14,079
EBITDA	2,736	3,659	4,731
Net income	1,341	1,813	2,060
CAPEX	139.4	217.5	1,021
Debt	14,889	3,272	2,218
Cash	459.7	179.1	414.5

About Sobha Developers

Sobha Limited constructs and develops residential and commercial projects primarily in India. Its residential projects include luxury and super luxury apartments, semi-luxury apartments, villas, row houses, presidential apartments, and plotted developments; and contractual projects for corporate entities, including offices, convention centers, software development blocks, multiplex theatres, hostel facilities, hotels, guest houses, food courts, restaurants, research centers, club houses, and factory buildings. The company also manufactures doors and door frames; fitted and loose furniture for hotels and serviced apartments; panelings, partitions, discussion tables, office workstations, reception desks, lift claddings, etc.; and modular kitchens, wardrobes, sofas, dining tables, exclusive chairs, etc. In addition, it undertakes contracts for corporate interiors for offices and hospitals; manufactures wood and wood-based products; manufactures and markets aluminum doors, windows, structural glazing, aluminum composite panels, and stainless steel cladding products; and undertakes other architectural metal works. Further, it manufactures concrete products, such as concrete blocks, pavers, kerbs, water drainage channels, paving slabs, and related landscape products, as well as mattresses under the Restoplus brand. The company was formerly known as Sobha Developers Limited and changed its name to Sobha Limited in August 2014. Sobha Limited was founded in 1995 and is headquartered in Bengaluru, India.