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Hotel Leela -Higher interest costs dent net margins…
Hotel Leela’s net sales remained in line with our estimates. It grew
11.4% YoY to | 142.3 crore, backed by a revival in demand especially in
leisure destinations. On the other hand, the operating cost continued to
remain higher and increased by 13.5% YoY on a sharp increase in other
operating costs (i.e. 45% of total operating cost) that increased 23%
YoY. There has also been a sharp rise in interest costs, which increased
from | 7.6 crore last year to | 20.1 crore in Q3FY11. Consequently, its
net profit declined by 23.6% YoY.
Demand recovers but at a lower pace
Hotel Leela’s net sales recorded a growth of 11.4% YoY to | 142.3 crore
(I-direct estimate: | 141.4 crore) backed by a revival in demand. The
growth in revenues was backed by growth in both occupancy and
average room rates, especially in leisure destinations.
PAT declines on lower margins and higher interest costs
Operating cost continued to remain higher during the quarter. It increased
13.5% YoY on a sharp increase in other operating costs (up 23% YoY) as
against revenue growth of 11.4%. As a result, operating margins declined
by 90 bps YoY to 39.1%. There has also been a sharp rise in interest cost,
that increased from | 7.6 crore last year to |20.1 crore in Q3FY11E due to
increase in the debt burden to fund its ongoing projects. Consequently,
the company reported a net decline of 23.6% YoY in its profitability.
New property launch at Delhi to provide fillip to revenue growth
The eagerly awaited 260-room five-star hotel launch at Chanakyapuri,
New Delhi and Chennai is expected to open from March 2011 and
Q2FY12E, respectively. With this addition, we expect revenue growth of
13% and 36.4% for FY11E and FY12E, respectively.
Valuation
At the CMP of | 40, the stock is trading at 25.0x and 19.1x its EV/EBITDA,
respectively. We believe it is fairly valued at this level considering the fact
that it is trading at premium valuations to its peer companies. We
continue to maintain our ADD rating on the stock with a price target of |
44 i.e. at 19.5x FY12E EV/EBITDA.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hotel Leela -Higher interest costs dent net margins…
Hotel Leela’s net sales remained in line with our estimates. It grew
11.4% YoY to | 142.3 crore, backed by a revival in demand especially in
leisure destinations. On the other hand, the operating cost continued to
remain higher and increased by 13.5% YoY on a sharp increase in other
operating costs (i.e. 45% of total operating cost) that increased 23%
YoY. There has also been a sharp rise in interest costs, which increased
from | 7.6 crore last year to | 20.1 crore in Q3FY11. Consequently, its
net profit declined by 23.6% YoY.
Demand recovers but at a lower pace
Hotel Leela’s net sales recorded a growth of 11.4% YoY to | 142.3 crore
(I-direct estimate: | 141.4 crore) backed by a revival in demand. The
growth in revenues was backed by growth in both occupancy and
average room rates, especially in leisure destinations.
PAT declines on lower margins and higher interest costs
Operating cost continued to remain higher during the quarter. It increased
13.5% YoY on a sharp increase in other operating costs (up 23% YoY) as
against revenue growth of 11.4%. As a result, operating margins declined
by 90 bps YoY to 39.1%. There has also been a sharp rise in interest cost,
that increased from | 7.6 crore last year to |20.1 crore in Q3FY11E due to
increase in the debt burden to fund its ongoing projects. Consequently,
the company reported a net decline of 23.6% YoY in its profitability.
New property launch at Delhi to provide fillip to revenue growth
The eagerly awaited 260-room five-star hotel launch at Chanakyapuri,
New Delhi and Chennai is expected to open from March 2011 and
Q2FY12E, respectively. With this addition, we expect revenue growth of
13% and 36.4% for FY11E and FY12E, respectively.
Valuation
At the CMP of | 40, the stock is trading at 25.0x and 19.1x its EV/EBITDA,
respectively. We believe it is fairly valued at this level considering the fact
that it is trading at premium valuations to its peer companies. We
continue to maintain our ADD rating on the stock with a price target of |
44 i.e. at 19.5x FY12E EV/EBITDA.
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