Sobha Ltd (SDL) reported a strong Q1FY26 presales performance, up 11% YoY to INR 20.8bn, driven by robust sustenance sales in Gurugram, Bengaluru, and other markets (INR 10bn), along with healthy new launches contributing INR 10.8bn (72% of the INR 15bn launched GDV). The company also delivered 1.07msf across key projects, showcasing its execution strength and in-house development capabilities. H2FY26 is expected to see an even stronger momentum, with big launches including Gurgaon Sector 63A (INR 30bn GDV), Pune, Mumbai, and Bengaluru (INR 30bn). These launches could drive presales of ~INR 60bn in H2FY26, setting the stage for FY26 presales to cross INR 100bn. This growth trajectory reinforces confidence in SDL’s ability to sustain strong sales performance, supported by strategic market presence and high-demand projects. SDL maintains a strong balance sheet (net cash-to-equity at 0.13x) and liquidity of INR 7bn. FY26 will be a year of major transition with (1) new geographies added in Noida (INR 10bn launch sold out in 1QFY26), Pune, and MMR (combined GDV of INR 100bn launches in FY26); (2) smaller single-phase multiple launches with GDV of up to INR 10bn each; (3) improving approval scenario; and (4) robust net cash of INR 7bn to be topped up with INR 15bn+ annual CFO. We expect presales momentum to sustain in the INR 90–100bn range for FY26, with upside possible if launch timelines and approval cycles further improve. SDL has laid out plans to expand in the MMR and Noida markets from FY26, ramp up its presence in Pune and Gurugram, and consolidate in Bengaluru. Valuation comfort, robust FCF generation, and likely deleveraging are key near-term triggers for further rerating. Given the robust launch pipeline, strong balance sheet, and stable cash flows, we maintain BUY on SDL with a TP of INR 2,459/sh.
▪ Record quarterly sales: The Noida maiden new launch played a pivotal role in SDL’s Q1FY26 performance, contributing INR 8.5bn (41%) to INR 20.8bn in presales. Of the INR 15bn GDV launched in the quarter, an impressive INR 10.8bn (72%) was sold, led by strong absorption in Noida (INR 8.7bn) and Kochi (INR 2.1bn). With INR 25bn worth of launches planned for Q2FY26 and assuming a 40% sales velocity, SDL is well-positioned to replicate the robust Q1FY26 presales at INR 19–20bn. Momentum could accelerate in H2FY26, which includes large-scale launches such as Gurgaon Sector 63A (INR 30bn), Pune, Mumbai, and Chennai (INR 15bn each), and Bengaluru (INR 30bn), setting the stage for a stronger H2FY26, with presales of INR 60bn. This underpins confidence in Sobha achieving INR 100bn+ (70% YoY growth) presales in FY26.
▪ Regulatory tailwinds support launch momentum: Regulatory approvals are now back on track, particularly in key markets like NCR/Bengaluru. This easing of approvals should help launch acceleration over the next 2-3 quarters. This revival will not only assist with project pipeline visibility but also help inventory monetization and scale-based margin recovery. Despite increasing activity, SDL maintains a disciplined capex approach, with a healthy balance sheet (net C/E at 0.13x). The company ended Q4FY25 with net cash of INR 7bn.
▪ 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); 2) a balanced mix of plotted, premium, and mid-income products; 3) 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. SDL remains a top pick in the southern premium housing space, with strong recall, expanding geographic footprint, and improving financial metrics. Its expanding launch pipeline and improving approvals position it well for volume-led growth, cash flow generation, and margin recovery in FY26.