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P e a k s e a s o n d r i v e s t o p l i n e g r o w t h …
East India Hotels (EIH) came out with better results in terms of topline and
bottomline compared to our estimates. EIH reported net sales of | 322.3
crore (I-direct estimate: | 315.6 crore), which was marginally above our
expectations while net profit at | 67.1 crore was much better than our
estimate of | 11 crore on account of a sharp increase in the other income.
Net sales grew ~17% YoY due to healthy growth in foreign tourist arrivals
(FTAs) in India. On the other hand, operating costs also rose by 19.8% YoY
backed by a rise in employee cost (up 17.7% YoY) and other costs (up
31.8% YoY) during the quarter. As a result, its operating margins saw a
decline of 140 bps YoY to 29.1%. However, with a sharp surge in the other
income from | 2.4 crore in Q4FY10 to | 93 crore in Q4FY11 on account of
interest income on FD of | 525 crore, its net profit shot up by 164.8% YoY
to | 67.1 crore. This was after offsetting insurance claim loss of | 30 crore
due to a shortfall arising from final assessment from insurance company.
ƒ Topline grows on healthy foreign tourist arrivals
EIH’s Q4FY11 remained fruitful in terms of topline on better
occupancies across its various properties on healthy growth in FTAs
(up 14%YoY) coupled with a good response to its Oberoi Mumbai
after re-opening in Q1FY11. Consequently, its topline grew by 17.4%
YoY to | 322.3 crore.
ƒ Growth in other income offsets impact of exceptional items
Interest costs continued to remain higher during the quarter,
increasing by 44.4% YoY to | 41.2 crore on account of higher debt.
The company also incurred an insurance claim loss of | 30 crore on
account of a shortfall arising from final assessment from the insurance
company. However, the impact of higher additional cost was negated
by a net profit of | 25.9 crore from sale of land and interest income
from unutilised rights issue proceeds of | 549.8 crore.
V a l u a t i o n
We expect the company’s profitability to improve on account of healthy
topline growth and a reduction in the debt burden. At the CMP of | 83, the
stock is trading at 13.2x and 9.4x its FY12E and FY13E EV/EBITDA,
respectively. We value the stock at 11.0x FY13E EV/EBITDA and arrive at a
target price of | 97 with a BUY rating on it.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P e a k s e a s o n d r i v e s t o p l i n e g r o w t h …
East India Hotels (EIH) came out with better results in terms of topline and
bottomline compared to our estimates. EIH reported net sales of | 322.3
crore (I-direct estimate: | 315.6 crore), which was marginally above our
expectations while net profit at | 67.1 crore was much better than our
estimate of | 11 crore on account of a sharp increase in the other income.
Net sales grew ~17% YoY due to healthy growth in foreign tourist arrivals
(FTAs) in India. On the other hand, operating costs also rose by 19.8% YoY
backed by a rise in employee cost (up 17.7% YoY) and other costs (up
31.8% YoY) during the quarter. As a result, its operating margins saw a
decline of 140 bps YoY to 29.1%. However, with a sharp surge in the other
income from | 2.4 crore in Q4FY10 to | 93 crore in Q4FY11 on account of
interest income on FD of | 525 crore, its net profit shot up by 164.8% YoY
to | 67.1 crore. This was after offsetting insurance claim loss of | 30 crore
due to a shortfall arising from final assessment from insurance company.
ƒ Topline grows on healthy foreign tourist arrivals
EIH’s Q4FY11 remained fruitful in terms of topline on better
occupancies across its various properties on healthy growth in FTAs
(up 14%YoY) coupled with a good response to its Oberoi Mumbai
after re-opening in Q1FY11. Consequently, its topline grew by 17.4%
YoY to | 322.3 crore.
ƒ Growth in other income offsets impact of exceptional items
Interest costs continued to remain higher during the quarter,
increasing by 44.4% YoY to | 41.2 crore on account of higher debt.
The company also incurred an insurance claim loss of | 30 crore on
account of a shortfall arising from final assessment from the insurance
company. However, the impact of higher additional cost was negated
by a net profit of | 25.9 crore from sale of land and interest income
from unutilised rights issue proceeds of | 549.8 crore.
V a l u a t i o n
We expect the company’s profitability to improve on account of healthy
topline growth and a reduction in the debt burden. At the CMP of | 83, the
stock is trading at 13.2x and 9.4x its FY12E and FY13E EV/EBITDA,
respectively. We value the stock at 11.0x FY13E EV/EBITDA and arrive at a
target price of | 97 with a BUY rating on it.
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