Multibagger realty stock trading in overbought zone; can it breach Rs 1,900 mark?

Shares of Sobha Limited have delivered multibagger returns in the last six months. On January 9 this year, the stock was trading at Rs 1302, delivering 126% returns against the close of Rs 576.15 on July 7, 2023 on BSE. On the other hand, the parent index BSE 500 rose 17.71% and the BSE realty index gained 60.46% in the last six months. Sobha shares closed lower at Rs 1295.80 on January 8. Market cap of the Sobha stood at Rs 12,352 crore in the current session. Total 0.11 lakh shares of the firm changed hands amounting to a turnover of Rs 1.41 crore on BSE today.

The Sobha stock has gained 120% in a year and risen 175% in three years.The stock hit a 52-week high of Rs 1339.95 on January 4, 2024 and a 52-week low of Rs 412.40 on March 29, 2023.

ALSO READ: Rs 29 to Rs 287: This debt-free stock turned into a multibagger in three years; down 8% from record high

Sobha stock has a one-year beta of 0.1, indicating very low volatility during the period.

In terms of technicals, the relative strength index (RSI) of Sobha stands at 76.9, signaling it's trading in the overbought territory. Shares of Sobha are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day and 200 day moving averages.

Nuvama Institutional Equities has assigned a target price of Rs 1577.

"Sobha's share in bookings was Rs 1740 crore (up 56% YoY/36% QoQ) on the back of higher realisation of Rs 11,732/square feet (up 22% YoY/15% QoQ). The company launched two new projects during the current quarter spanning 3.8 million square feet; healthy collections led to a decline in leverage. With the housing cycle turning, we expect the sales momentum to remain healthy. We factor in higher pre-sales trajectory; maintain 'BUY' with a revised target price of Rs 1,577 (earlier Rs 903) with a valuation rollover to Q3FY26E," said Nuvama.

Antique Broking has maintained a buy stance and revised its price target to Rs 1946 from Rs 900 for Sobha stock.

"On the back of a robust pipeline across geographies and continued housing demand, we are confident of Sobha's near and medium-term outlook. We expect Sobha to clock sales bookings in excess of Rs 6,500 crore in FY24 with healthy cash flow generation (Rs 9-10 bn) due to its unwavering focus on margin and execution. We reiterate BUY rating with a target price of Rs 1,946 (earlier Rs 900)," said Antique Broking.

Brokerage Motilal Oswal has assigned a target price of Rs 1,400 on the stock. The brokerage expects Sobha to outperform in terms of growth, considering its focus on unlocking its vast land reserve and exploring external growth opportunities through its healthy balance sheet.

"The outperformance is also expected to be driven by improvements in profitability. Further, visibility in the monetisation of some of its large land parcels in Bengaluru will lead to a re-rating in its implied land valuation. Sobha is our top idea for 2024 with a revised target price to Rs 1,400, 25 per cent upside potential," the brokerage said.

Motilal Oswal has factored in higher launches over FY24-26E and revised its pre-sales estimates for Sobha by 4 per cent for FY24 and 12 per cent for FY25.

"We believe that as the company unlocks its vast land reserves and explores growth opportunities beyond its existing land bank, it will provide further growth visibility. Project launches on its large land parcels in Bengaluru and Tamil Nadu will drive re-rating for its existing land valuation," Motilal Oswal said.

Abhijeet from Tips2trades said, "Sobha stock is bullish but also very overbought on the Daily charts with next resistance at Rs 1350. Investors should book profits at current levels as a daily close below the support of Rs 1120 could lead to a target of Rs 909 in the near term."

Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as an investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

Also read: ZEE falls 13% amid report Rs 340 crore worth shares change hands in large trade

Also read: Top 5 stocks to watch on January 9, 2024: BEML, Dr Reddy's, Delta Corp and more