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Kamat Hotels reported net sales of | 32.5 crore (up 10.1% YoY, 16.1%
QoQ) that remained below our expectations (I-direct estimate: | 35.2
crore). The growth remained lower mainly on account of lower than
expected growth in average room rates compared to last year.
Operating costs for the quarter also remained higher and grew 14.8%
YoY. Among operating costs components, raw material and employee
costs increased 30.1% and 55.5% YoY, respectively. The company
reported a net profit of |.2.4 crore (I-direct estimate: | 2.5 crore) that
declined 56.6% YoY, as last year’s net profit included provision writeb
a ck to the tune of | 5.9 crore.
Revenue grows but at a lower pace
The quarter saw a gradual pick-up in demand for hotel rooms from
corporate travellers and recovery in demand from the MICE segment
compared to the last quarter. Occupancy levels have improved across all
four brands. As a result, the overall operating income rose 10.1% YoY to
| 32.5 crore. However, growth remained lower on subdued ARR growth.
Margin contracts on higher employee and raw material costs
Operating costs for the quarter also remained higher and grew by 14.8%
YoY. Among operating costs components, raw material and employee
costs increased 30.1% and 55.5% YoY, respectively. As a result,
operating margins declined by 265 bps YoY to 35.2%.
Valuations
We expect FY10-12E revenue CAGR of 24.9% taking into account addition
of nearly 120 rooms at its existing property in Mumbai. This is expected
to get completed in a phased manner during FY10-12E. At the CMP of |
88, the stock is trading at 14.9x and 12.5x its FY11E and FY12E
EV/EBITDA, respectively. We remain positive on the company on account
of the favourable long-term room demand-supply scenario in Mumbai
compared to other metros. We have valued the stock at 13.0x FY12E
EV/EBITDA and arrived at a target price of | 97, with an ADD rating.
Capex plans
The company is currently focusing on completing the construction work
of Orchid expansion hotel project at Mumbai, which would add nearly 120
rooms to its existing 245 five star rooms in a phased manner over FY12.
With this addition, we expect revenue CAGR of 24.9% in our forecast
period FY10-12E. Apart from this, it is also adding rooms under
management contracts. The new contracts under O&M includes a resort
at Udaipur (80 rooms), Karnataka (60 rooms) under the Lotus brand and
business hotel at Delhi (150 rooms) under the VITS brand.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Kamat Hotels reported net sales of | 32.5 crore (up 10.1% YoY, 16.1%
QoQ) that remained below our expectations (I-direct estimate: | 35.2
crore). The growth remained lower mainly on account of lower than
expected growth in average room rates compared to last year.
Operating costs for the quarter also remained higher and grew 14.8%
YoY. Among operating costs components, raw material and employee
costs increased 30.1% and 55.5% YoY, respectively. The company
reported a net profit of |.2.4 crore (I-direct estimate: | 2.5 crore) that
declined 56.6% YoY, as last year’s net profit included provision writeb
a ck to the tune of | 5.9 crore.
Revenue grows but at a lower pace
The quarter saw a gradual pick-up in demand for hotel rooms from
corporate travellers and recovery in demand from the MICE segment
compared to the last quarter. Occupancy levels have improved across all
four brands. As a result, the overall operating income rose 10.1% YoY to
| 32.5 crore. However, growth remained lower on subdued ARR growth.
Margin contracts on higher employee and raw material costs
Operating costs for the quarter also remained higher and grew by 14.8%
YoY. Among operating costs components, raw material and employee
costs increased 30.1% and 55.5% YoY, respectively. As a result,
operating margins declined by 265 bps YoY to 35.2%.
Valuations
We expect FY10-12E revenue CAGR of 24.9% taking into account addition
of nearly 120 rooms at its existing property in Mumbai. This is expected
to get completed in a phased manner during FY10-12E. At the CMP of |
88, the stock is trading at 14.9x and 12.5x its FY11E and FY12E
EV/EBITDA, respectively. We remain positive on the company on account
of the favourable long-term room demand-supply scenario in Mumbai
compared to other metros. We have valued the stock at 13.0x FY12E
EV/EBITDA and arrived at a target price of | 97, with an ADD rating.
Capex plans
The company is currently focusing on completing the construction work
of Orchid expansion hotel project at Mumbai, which would add nearly 120
rooms to its existing 245 five star rooms in a phased manner over FY12.
With this addition, we expect revenue CAGR of 24.9% in our forecast
period FY10-12E. Apart from this, it is also adding rooms under
management contracts. The new contracts under O&M includes a resort
at Udaipur (80 rooms), Karnataka (60 rooms) under the Lotus brand and
business hotel at Delhi (150 rooms) under the VITS brand.
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