SOBHA - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 19 Sept 25, 2:16 pm

Fundamental Rating: 2.9

📊 Core Financials Overview

Profitability

ROE: 3.31% and ROCE: 6.98% are below industry norms, indicating inefficient capital deployment.

EPS of ₹13.9 is modest, especially against a P/E of 117, which is nearly 3× the industry average (40.7).

PAT declined slightly QoQ (₹50.0 Cr → ₹45.9 Cr), despite a reported 408% profit variation—likely due to base effects or one-off adjustments.

Balance Sheet Health

Debt-to-equity ratio: 0.26 — conservative leverage, a positive for long-term stability.

Book Value: ₹414 vs Current Price: ₹1,629 → P/B ratio ~3.93, which is high for a real estate company.

Dividend Yield: 0.18% — minimal, suggesting reinvestment focus.

Cash Flow & Stability

PEG Ratio: −14.8 — distorted due to inconsistent earnings growth.

RSI: 66.8 and MACD: 20.1 — indicate short-term bullish momentum, but nearing overbought territory.

📉 Valuation Metrics

Metric Value Insight

P/E Ratio 117 Extremely overvalued

P/B Ratio ~3.93 Premium pricing

PEG Ratio −14.8 Not meaningful due to erratic growth

Intrinsic Value ~₹1,300–₹1,400 Estimated below current price

Sobha Ltd is overvalued based on earnings and book value, despite its sectoral positioning.

🏢 Business Model & Competitive Edge

Sector: Premium real estate developer with operations in residential, commercial, and contractual projects.

Strengths

Strong brand in luxury housing

Integrated manufacturing capabilities (interiors, glazing, concrete) support cost control

Challenges

Low return ratios and high valuation

Weak interest coverage and reliance on other income for profitability

Declining FII holding (−0.82%) signals cautious institutional sentiment

According to Screener, Sobha has reduced debt but maintains a low interest coverage ratio and ROE of just 2.92% over the last 3 years

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📌 Entry Zone Recommendation

Suggested Entry Range: ₹1,300–₹1,400

Below 200 DMA (₹1,473) and closer to intrinsic value

RSI nearing overbought zone; MACD suggests momentum may be peaking

🧭 Long-Term Holding Guidance

Avoid Fresh Entry at Current Levels: Valuation is stretched and fundamentals are not compelling.

Hold Only if Strategic: Suitable for investors betting on long-term real estate demand and brand strength.

Watchlist Triggers

ROE/ROCE improvement

Debt reduction

Institutional accumulation

Sobha Ltd has brand equity and operational depth, but its current pricing demands caution. You can explore more on TopStockResearch’s fundamental dashboard

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www.screener.in

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www.topstockresearch.com

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