Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 3QFY2011, TajGVK reported top-line growth of 9.2% yoy to `70cr (`64cr),
below our estimates of `76cr, primarily on account on lower-than-expected
occupancy rates (OR) and average room rate (ARR) in Hyderabad hotels. OPM at
39.6% also came in below our estimates of 41.0%. PAT increased by 5.9% yoy to
`13cr (`12cr), as against our expectations of `15cr. Overall, OR increased to
68%, compared to 64% in 3QFY2010. Going ahead, we expect the company to
improve on its key operating parameters. We maintain Buy on the stock.
OR comes in at 68%: Overall OR for the quarter came in at 68%, which grew
from 64% in 3QFY2010. Hyderabad hotels reported OR of 67%, which was
below our expectations. The Chandigarh hotel posted OR of 77%. Chennai hotel
posted OR of 65% with ARR of ~`5,200. Owing to lower-than-expected OR and
ARR, OPM also remained 136bp below our estimates.
Outlook and valuation: Going ahead, we expect the scenario for the entire hotel
industry to improve, based on a positive demand-supply trend. The industry
continues to witness a steady recovery, with an improvement in Foreign Tourist
Arrivals (FTA) and the overall economy. TajGVK is expected to ride this recovery
by adding a 189-room hotel in FY2012, increasing its owned rooms to 1,086
from 897 currently. However, owing to below-expectation results, we have revised
our top-line estimates for FY2011 and FY2012 downwards by 4.0% and 4.9% to
`266cr and `316cr, respectively, and PAT estimates by 6.3% and 13.5% to `45cr
and `62cr, respectively. At the CMP, the stock is trading at 15.5x and 11.3x its
FY2011E and FY2012E PAT, respectively. We maintain Buy on the stock with a
revised Target Price of `197 (`228).
OPM falls to 39.6%
The company reported a marginal decline in OPM during the quarter to 39.6%
from 40.5% in 3QFY2010. Sequentially, OPM improved by 735bp, mainly due to
the seasonality effect. OPM still has not reached its peak and we expect it to
expand in the quarters to come
PAT increases to `12.9cr
PAT grew to `12.9cr during the quarter, backed by improved OR. However, PAT
growth was only 5.9% yoy, below our expectations. In the recent quarters, the
company has shown modest PAT growth. Going ahead, we expect this growth to
be higher, on the back of robust sales growth and higher OPM.
Key takeaways from the management call
Begumpet hotel is on track and will be completed by June–July this year.
Overall, management expects the hotel to achieve average OR of ~50% and
average ARR of ~`5,000 in its first year of operation.
Management is looking to start its first Ginger hotel over the next two years.
The next hotel that it plans to develop is in Bangalore, although the plans are
still in the discussion stage. Over the next five years, management targets to
take the total room inventory to 1,500–2,000 rooms.
Chandigarh hotel performed impressively during the quarter, posting ARR of
~`8,000 and OR of 73%.
F&B revenue did much better than room revenue during the quarter. Both
revenue streams contributed nearly the same to the top line.
The company undertook rate hikes in November 2010, compared to
September–October every year.
Investment arguments
Strengthening its foothold in the Hyderabad market: TajGVK is the market-leader
in the Hyderabad market, where it has a share of nearly 30% in premium-segment
rooms. The company is coming up with a 189-room property in Begumpet to
further strengthen its foothold and to tap mid-market room demand. The company
also plans to add service apartments and retail space in its existing Taj Krishna
property. Post the expansion, we believe TajGVK would emerge as a prime
beneficiary in Hyderabad.
Diversification strategy to de-risk the business model: In FY2008, 78% of TajGVK's
room inventory was located at Hyderabad. To diversify its presence, the company
came up with Taj Mount Road in Chennai in December 2008. With this, the
company has toned down Hyderabad’s concentration to 59% of the total room
inventory in FY2009. The company is also planning to enter Bangalore and is
exploring the possibility of entering the mid-market segment through tie-ups with
IHCL's Ginger. We believe this strategy will prove beneficial in the long-run, as it
would reduce over exposure in the Hyderabad market.
Asset-light strategy to keep the balance sheet healthy: TajGVK is adding 189
rooms at its Begumpet property, using an asset-light strategy. This would require a
lower capital outlay as compared to a greenfield expansion. We expect the
company's debt-equity ratio to be at a comfortable level of 0.3x in FY2012E, which
provides TajGVK with adequate room to plan further expansions, without
hampering its balance sheet quality.
Outlook and valuation
TajGVK is well poised to ride the expected recovery in the hotel industry. The
industry continues to witness a steady recovery, with an improvement in the FTA
and the overall economy. The demand-supply trend in the industry is expected to
remain favourable over the years to come. TajGVK is planning to add a 189-room
hotel in FY2012, increasing its owned rooms to 1,086 from 897 currently.
Plans of setting up a Ginger hotel in two years’ time are also being considered.
We believe this augurs well for the company. However, owing to below-expectation
results in 3QFY2011, we have revised our top-line estimates for FY2011 and
FY2012 downwards by 4.0% and 4.9% to `266cr and `316cr, respectively, and
PAT estimates by 6.3% and 13.5% to `45cr and `62cr, respectively. Overall, we
expect sales to grow at a 17.8% CAGR over FY2010–12E, while PAT is expected to
post a 30.5% CAGR over the same period. At the CMP, the stock is trading at
15.5x and 11.3x its FY2011E and FY2012E PAT, respectively. We maintain Buy on
the stock with a revised Target Price of `197 (`228).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TajGVK – 3QFY2011 Result Update
Angel Broking maintains a Buy on TajGVK with a Target Price of Rs. 197.
For 3QFY2011, TajGVK reported top-line growth of 9.2% yoy to `70cr (`64cr),
below our estimates of `76cr, primarily on account on lower-than-expected
occupancy rates (OR) and average room rate (ARR) in Hyderabad hotels. OPM at
39.6% also came in below our estimates of 41.0%. PAT increased by 5.9% yoy to
`13cr (`12cr), as against our expectations of `15cr. Overall, OR increased to
68%, compared to 64% in 3QFY2010. Going ahead, we expect the company to
improve on its key operating parameters. We maintain Buy on the stock.
OR comes in at 68%: Overall OR for the quarter came in at 68%, which grew
from 64% in 3QFY2010. Hyderabad hotels reported OR of 67%, which was
below our expectations. The Chandigarh hotel posted OR of 77%. Chennai hotel
posted OR of 65% with ARR of ~`5,200. Owing to lower-than-expected OR and
ARR, OPM also remained 136bp below our estimates.
Outlook and valuation: Going ahead, we expect the scenario for the entire hotel
industry to improve, based on a positive demand-supply trend. The industry
continues to witness a steady recovery, with an improvement in Foreign Tourist
Arrivals (FTA) and the overall economy. TajGVK is expected to ride this recovery
by adding a 189-room hotel in FY2012, increasing its owned rooms to 1,086
from 897 currently. However, owing to below-expectation results, we have revised
our top-line estimates for FY2011 and FY2012 downwards by 4.0% and 4.9% to
`266cr and `316cr, respectively, and PAT estimates by 6.3% and 13.5% to `45cr
and `62cr, respectively. At the CMP, the stock is trading at 15.5x and 11.3x its
FY2011E and FY2012E PAT, respectively. We maintain Buy on the stock with a
revised Target Price of `197 (`228).
Net sales up 9.2%
The company has been posting a moderate top-line growth rate over the past few
quarters. In 3QFY2011, sales grew by 9.2% yoy, which is a remarkable
improvement from the sales decline reported by the company till 2QFY2010.
However, the top-line increase has not been as robust as earlier expected.
Nevertheless, we expect growth to pick up going ahead.
OPM falls to 39.6%
The company reported a marginal decline in OPM during the quarter to 39.6%
from 40.5% in 3QFY2010. Sequentially, OPM improved by 735bp, mainly due to
the seasonality effect. OPM still has not reached its peak and we expect it to
expand in the quarters to come
PAT increases to `12.9cr
PAT grew to `12.9cr during the quarter, backed by improved OR. However, PAT
growth was only 5.9% yoy, below our expectations. In the recent quarters, the
company has shown modest PAT growth. Going ahead, we expect this growth to
be higher, on the back of robust sales growth and higher OPM.
Key takeaways from the management call
Begumpet hotel is on track and will be completed by June–July this year.
Overall, management expects the hotel to achieve average OR of ~50% and
average ARR of ~`5,000 in its first year of operation.
Management is looking to start its first Ginger hotel over the next two years.
The next hotel that it plans to develop is in Bangalore, although the plans are
still in the discussion stage. Over the next five years, management targets to
take the total room inventory to 1,500–2,000 rooms.
Chandigarh hotel performed impressively during the quarter, posting ARR of
~`8,000 and OR of 73%.
F&B revenue did much better than room revenue during the quarter. Both
revenue streams contributed nearly the same to the top line.
The company undertook rate hikes in November 2010, compared to
September–October every year.
Investment arguments
Strengthening its foothold in the Hyderabad market: TajGVK is the market-leader
in the Hyderabad market, where it has a share of nearly 30% in premium-segment
rooms. The company is coming up with a 189-room property in Begumpet to
further strengthen its foothold and to tap mid-market room demand. The company
also plans to add service apartments and retail space in its existing Taj Krishna
property. Post the expansion, we believe TajGVK would emerge as a prime
beneficiary in Hyderabad.
Diversification strategy to de-risk the business model: In FY2008, 78% of TajGVK's
room inventory was located at Hyderabad. To diversify its presence, the company
came up with Taj Mount Road in Chennai in December 2008. With this, the
company has toned down Hyderabad’s concentration to 59% of the total room
inventory in FY2009. The company is also planning to enter Bangalore and is
exploring the possibility of entering the mid-market segment through tie-ups with
IHCL's Ginger. We believe this strategy will prove beneficial in the long-run, as it
would reduce over exposure in the Hyderabad market.
Asset-light strategy to keep the balance sheet healthy: TajGVK is adding 189
rooms at its Begumpet property, using an asset-light strategy. This would require a
lower capital outlay as compared to a greenfield expansion. We expect the
company's debt-equity ratio to be at a comfortable level of 0.3x in FY2012E, which
provides TajGVK with adequate room to plan further expansions, without
hampering its balance sheet quality.
Outlook and valuation
TajGVK is well poised to ride the expected recovery in the hotel industry. The
industry continues to witness a steady recovery, with an improvement in the FTA
and the overall economy. The demand-supply trend in the industry is expected to
remain favourable over the years to come. TajGVK is planning to add a 189-room
hotel in FY2012, increasing its owned rooms to 1,086 from 897 currently.
Plans of setting up a Ginger hotel in two years’ time are also being considered.
We believe this augurs well for the company. However, owing to below-expectation
results in 3QFY2011, we have revised our top-line estimates for FY2011 and
FY2012 downwards by 4.0% and 4.9% to `266cr and `316cr, respectively, and
PAT estimates by 6.3% and 13.5% to `45cr and `62cr, respectively. Overall, we
expect sales to grow at a 17.8% CAGR over FY2010–12E, while PAT is expected to
post a 30.5% CAGR over the same period. At the CMP, the stock is trading at
15.5x and 11.3x its FY2011E and FY2012E PAT, respectively. We maintain Buy on
the stock with a revised Target Price of `197 (`228).
No comments:
Post a Comment