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On Monday, CLSA analysts revised their outlook on Sobha Ltd (SOBHA:IN), reducing the price target to INR1,150 from the previous INR1,315, while maintaining an Underperform rating on the stock. The adjustment follows Sobha Ltd’s announcement that it has lowered its fiscal year 2025 presales guidance from an anticipated 20% year-over-year growth to a projection of no growth, citing delays in new project launches as the primary reason.
The company’s EBITDA margin has continued to underperform expectations, which has also influenced CLSA’s reassessment. Despite this setback, Sobha’s management remains optimistic about the future, projecting a return to presale growth in fiscal year 2026 with an expected profit before tax (PBT) margin ranging between 15% and 18% on unrecognised revenue.
CLSA expressed concerns regarding the company’s mid-term margin outlook, anticipating continued weakness. This perspective led to a downward revision of CLSA’s presale and margin estimates for Sobha, as well as a postponement in the completion dates of the company’s projects. These factors have contributed to a significant reduction in CLSA’s earnings forecast for Sobha over the fiscal years 2025 to 2027.
The report from CLSA concludes with a reaffirmation of the Underperform rating for Sobha Ltd’s stock. This rating reflects the analysts’ view that the stock may not perform as well as the broader market or within its sector due to the challenges outlined, including the revised presales guidance and persisting margin pressures.
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