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Royal Orchid Hotels- B e t t e r o c c u p a n c y l e v el d r i v e s t o p l i n e …
Royal Orchid Hotels reported net sales of | 45.4 crore during Q4FY11,
which was higher than our estimate of | 43 crore mainly on account of
better occupancy rate at its various hotels while net profit at | 4.8 crore
was ahead of our estimate of | 3.8 crore. On the other hand, the
operating cost increased during the quarter by 25.6% YoY to | 32 crore,
mainly due to employee cost and other expenses that surged by 37.1%
YoY and 51.5% YoY to | 8.4 crore and | 17.1 crore, respectively. As a
result, the operating margin got squeezed ~121 bps YoY to 29.5%. Net
profit for the quarter grew 72.7% YoY to | 4.8 crore on the back of a
sharp rise in other income and decline in depreciation charges.
ƒ Better occupancy rate leads to topline growth
Royal Orchid’s Q4FY11 topline grew by 23.5% YoY to | 45.4 crore
mainly driven by a rise in occupancies across business and leisure
destinations. Bangalore, where the company has a major room
inventory, reported decent demand growth due to a revival in the
IT/BFSI segment. In addition, topline growth was also driven by
addition of a new hotel in Ahmedabad and increase in average
occupancy levels in other destinations like Goa, Jaipur and Mysore
during Q4FY11.
ƒ Margin under pressure on higher operating costs
Royal Orchid’s total operating cost remained high at | 32 crore, up
25.7% YoY during Q4FY11, mainly due to a sharp rise in raw
material cost, employee cost & other expenses by 18.4% YoY,
37.1% YoY and 51.6% YoY to | 4.4 crore, | 8.4 crore and | 17.1
crore, respectively. Consequently, the OPM declined 120.5 bps YoY
to 29.5%.
V a l u a t i o n
At the CMP of | 64, the stock is trading at 8.6x and 7.5x its FY12E and
FY13E EV/EBITDA, respectively. We believe the net sales of the company
would grow at a CAGR of 19% between FY11 and FY13E due to the
addition of new hotels in Jaipur and Hyderabad in Q4FY11 and addition of
a new 154-room hotel in Mumbai (in Q4FY12). Hence, we continue to
maintain our BUY rating on the stock with a revised price target of | 73
(i.e. at 8.0x FY13E EV/EBITDA).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Royal Orchid Hotels- B e t t e r o c c u p a n c y l e v el d r i v e s t o p l i n e …
Royal Orchid Hotels reported net sales of | 45.4 crore during Q4FY11,
which was higher than our estimate of | 43 crore mainly on account of
better occupancy rate at its various hotels while net profit at | 4.8 crore
was ahead of our estimate of | 3.8 crore. On the other hand, the
operating cost increased during the quarter by 25.6% YoY to | 32 crore,
mainly due to employee cost and other expenses that surged by 37.1%
YoY and 51.5% YoY to | 8.4 crore and | 17.1 crore, respectively. As a
result, the operating margin got squeezed ~121 bps YoY to 29.5%. Net
profit for the quarter grew 72.7% YoY to | 4.8 crore on the back of a
sharp rise in other income and decline in depreciation charges.
ƒ Better occupancy rate leads to topline growth
Royal Orchid’s Q4FY11 topline grew by 23.5% YoY to | 45.4 crore
mainly driven by a rise in occupancies across business and leisure
destinations. Bangalore, where the company has a major room
inventory, reported decent demand growth due to a revival in the
IT/BFSI segment. In addition, topline growth was also driven by
addition of a new hotel in Ahmedabad and increase in average
occupancy levels in other destinations like Goa, Jaipur and Mysore
during Q4FY11.
ƒ Margin under pressure on higher operating costs
Royal Orchid’s total operating cost remained high at | 32 crore, up
25.7% YoY during Q4FY11, mainly due to a sharp rise in raw
material cost, employee cost & other expenses by 18.4% YoY,
37.1% YoY and 51.6% YoY to | 4.4 crore, | 8.4 crore and | 17.1
crore, respectively. Consequently, the OPM declined 120.5 bps YoY
to 29.5%.
V a l u a t i o n
At the CMP of | 64, the stock is trading at 8.6x and 7.5x its FY12E and
FY13E EV/EBITDA, respectively. We believe the net sales of the company
would grow at a CAGR of 19% between FY11 and FY13E due to the
addition of new hotels in Jaipur and Hyderabad in Q4FY11 and addition of
a new 154-room hotel in Mumbai (in Q4FY12). Hence, we continue to
maintain our BUY rating on the stock with a revised price target of | 73
(i.e. at 8.0x FY13E EV/EBITDA).
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