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Mahindra Holidays & Resorts India Ltd (MHRIL) is a leading player in the
leisure hospitality industry, provides family holidays primarily through
vacation ownership memberships. Mahindra Holidays currently has a pan-
India presence through its extensive network of 33 resorts and 1476
apartments. Currently company has 109,884 vacation ownership members as
on March 31, 2010.
Investment Rationale
Prominent player in leisure hospitality
• Club Mahindra has the highest brand equity among timeshare
companies in India. With the escalating demand of VO products,
MHRIL with its strong brand and pan India presence is well poised to
take advantage of it.
• In terms of market share, MHRL has accounted for 72% of the total
active members across the vacation ownership industry in India with
Resort Condominiums International (RCI) up to end May 2009.
Mounting member base – strengthening top line
Membership enrollment has increased at a CAGR of 31% over the last
five years and reached to 113829 as on June 30 2010.
Company has launched new services offerings such as, Zest – targeting
young urban consumers, club mahindra fundays, club mahindra travel
etc, which will help company to capture more potential members in
near future. Increasing the membership base and the number of resorts
would enable company to increase the total income from vacation
ownership.
Distinctive and a Vigorous Business Model
Company follows a mixed use model by generating revenue from
selling vacation ownership to members and also provides accessibility
to non members for its unused apartments on a per night room tariff.
This enables MHRIL to enhance its revenue through optimum
occupancy and sales from restaurants and other services.
Company also provide financing option to its members, and attract a
interest a rate of 15-16% in a year.
Members pay an upfront membership fee and are also required to pay
an annual subscription fee each year thereafter.
Valuation
Vacation Ownership Industry is at its nascent stage and MHRIL is favorably
placed with 70% market share of total VO memberships in India. Innovative
and distinctive product in its portfolio, constant growth in membership, high
quality of services makes MHRIL a prominent player in VO industry.
At the current market price of Rs. 462, MHRIL is trading at PE of 26.4x
and 22.1x of FY11E and FY12E earnings of Rs. 17.5 and Rs. 20.9
respectively. We expect revenues and PAT to post CAGR of 25% and
30%, respectively, over FY10-12 E. We recommend BUY rating on the
stock with a target price of Rs. 580/- (25% upside) in 12 months.
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