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Moderate growth, muted outlook…
Taj GVK’s growth in Q4FY11 remained lower than our expectations with
only a 10% YoY increase in revenues. The company posted net revenues of
| 69.7 crore as against our estimated net revenues of | 72.7 crore. The
growth remained subdued mainly because of muted room rates (ARRs).
However, improved occupancy levels facilitated the company to grow its
topline by 10% YoY. Operating margins for the quarter declined by 181 bps
YoY to 39.7%. This was mainly on account of higher employee and F&B
costs that increased by 25.5% and 12.3% YoY, respectively. Net profit for
the quarter stood at | 12.9 crore, increasing marginally by 4.4% YoY.
Occupancy levels improve, ARR growth remains muted
The growth in revenues for the quarter was mainly led by a rise in
occupancy levels while growth in ARRs remained muted on account
of higher supply of rooms in Hyderabad. As a result, Hyderabad
reported average occupancy levels of 70% for the quarter that was
lower compared to occupancy levels in Chandigarh and Chennai. Both
these cities clocked average occupancy levels of 74% and 75%,
respectively, for the quarter.
Pressure on margins continues to remain
The operating margin for the quarter remained under pressure on
account of lower than expected growth in sales and higher operating
costs. Operating costs remained higher mainly on account of higher
employee and F&B cost that increased by 25.5% and 12.3%,
respectively. As a result, operating margins for the quarter declined
181 bps to 39.7% YoY.
Valuations
At the CMP of | 103, the stock is trading at 7.8x and 6.8x its FY12E and
FY13E EV/EBITDA, respectively. Despite concerns over rise in room supply
in Hyderabad, Taj GVK is expected to maintain its market share in our
forecast period of FY10-13E as it is competitively positioned in terms of
room rates against its competitors. Hence, we have maintained our HOLD
rating on it with a target price of | 110 (i.e. at 7.0x FY13E EV/EBITDA).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Moderate growth, muted outlook…
Taj GVK’s growth in Q4FY11 remained lower than our expectations with
only a 10% YoY increase in revenues. The company posted net revenues of
| 69.7 crore as against our estimated net revenues of | 72.7 crore. The
growth remained subdued mainly because of muted room rates (ARRs).
However, improved occupancy levels facilitated the company to grow its
topline by 10% YoY. Operating margins for the quarter declined by 181 bps
YoY to 39.7%. This was mainly on account of higher employee and F&B
costs that increased by 25.5% and 12.3% YoY, respectively. Net profit for
the quarter stood at | 12.9 crore, increasing marginally by 4.4% YoY.
Occupancy levels improve, ARR growth remains muted
The growth in revenues for the quarter was mainly led by a rise in
occupancy levels while growth in ARRs remained muted on account
of higher supply of rooms in Hyderabad. As a result, Hyderabad
reported average occupancy levels of 70% for the quarter that was
lower compared to occupancy levels in Chandigarh and Chennai. Both
these cities clocked average occupancy levels of 74% and 75%,
respectively, for the quarter.
Pressure on margins continues to remain
The operating margin for the quarter remained under pressure on
account of lower than expected growth in sales and higher operating
costs. Operating costs remained higher mainly on account of higher
employee and F&B cost that increased by 25.5% and 12.3%,
respectively. As a result, operating margins for the quarter declined
181 bps to 39.7% YoY.
Valuations
At the CMP of | 103, the stock is trading at 7.8x and 6.8x its FY12E and
FY13E EV/EBITDA, respectively. Despite concerns over rise in room supply
in Hyderabad, Taj GVK is expected to maintain its market share in our
forecast period of FY10-13E as it is competitively positioned in terms of
room rates against its competitors. Hence, we have maintained our HOLD
rating on it with a target price of | 110 (i.e. at 7.0x FY13E EV/EBITDA).
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