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D e m a n d r e c o v e r s b u t a t l o w e r p a c e …
East India Hotels (EIH) reported Q1FY12 net sales of | 246.6 crore and PAT
of | 14.5 crore, which was below our estimate | 258.1 crore and | 20.5
crore respectively mainly due to lower than expected growth in average
room rate (ARR) across business destinations. Net sales grew ~21% YoY
due marginal increase in occupancy as well as ARRs and incremental
revenue inflow from BKC Mumbai. On the other hand, operating costs rose
moderately by 11% YoY during the quarter. Due to cost control measures,
operating margins expanded by 710 bps YoY to 19.4%. However, with a
sharp surge in the other income from | 0.8 crore in Q1FY11 to | 9.3 crore in
Q1FY12 on account of gains from short term investments and lower interest
outgo (down 38% YoY), company reported net profit of | 14.5 crore against
a loss of | 16 crore reported in Q1FY11.
ƒ Addition of new keys leads top-line growth
EIH’s Q1FY12 surged by 21% YoY to | 246.6 crore on the back of
incremental revenue from new rooms in BKC Mumbai. Average
occupancy levels also seen a marginal improvement of over 100bps,
while average room rates remained flat on account of lean season
impact.
ƒ Control in operating costs, higher other income drives bottom-line
Various cost control measures led operating cost to grow at moderate
rate of 11% YoY to | 198.7 crore in Q1FY12. The main cost driver
remained raw material cost (up 16% YoY to |36.1 crore) and
employee cost (up 12% YoY to | 78.4 crore), while P&F and other
expenses remained at comfort zone by rising 6%-8% YoY. This
helped operating profit to grow 90% YoY to | 47.8 crore, thus
expanding margin by ~700 bps YoY. Finally, net profit came at | 14.5
crore against loss of ~ | 16 crore (YoY) on sharp rise in other income
and lower interest outgo (declined by 38% YoY to | 20.7 crore).
V a l u a t i o n s
We expect the company’s profitability to improve due to its presence in key
business and leisure locations and reduction in the debt burden. At the
CMP of | 89, the stock is trading at 14.0x and 10.2x its FY12E and FY13E
EV/EBITDA, respectively. We value the stock at 12.0x FY13E EV/EBITDA and
arrive at a target price of | 102 with a BUY rating on it.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D e m a n d r e c o v e r s b u t a t l o w e r p a c e …
East India Hotels (EIH) reported Q1FY12 net sales of | 246.6 crore and PAT
of | 14.5 crore, which was below our estimate | 258.1 crore and | 20.5
crore respectively mainly due to lower than expected growth in average
room rate (ARR) across business destinations. Net sales grew ~21% YoY
due marginal increase in occupancy as well as ARRs and incremental
revenue inflow from BKC Mumbai. On the other hand, operating costs rose
moderately by 11% YoY during the quarter. Due to cost control measures,
operating margins expanded by 710 bps YoY to 19.4%. However, with a
sharp surge in the other income from | 0.8 crore in Q1FY11 to | 9.3 crore in
Q1FY12 on account of gains from short term investments and lower interest
outgo (down 38% YoY), company reported net profit of | 14.5 crore against
a loss of | 16 crore reported in Q1FY11.
ƒ Addition of new keys leads top-line growth
EIH’s Q1FY12 surged by 21% YoY to | 246.6 crore on the back of
incremental revenue from new rooms in BKC Mumbai. Average
occupancy levels also seen a marginal improvement of over 100bps,
while average room rates remained flat on account of lean season
impact.
ƒ Control in operating costs, higher other income drives bottom-line
Various cost control measures led operating cost to grow at moderate
rate of 11% YoY to | 198.7 crore in Q1FY12. The main cost driver
remained raw material cost (up 16% YoY to |36.1 crore) and
employee cost (up 12% YoY to | 78.4 crore), while P&F and other
expenses remained at comfort zone by rising 6%-8% YoY. This
helped operating profit to grow 90% YoY to | 47.8 crore, thus
expanding margin by ~700 bps YoY. Finally, net profit came at | 14.5
crore against loss of ~ | 16 crore (YoY) on sharp rise in other income
and lower interest outgo (declined by 38% YoY to | 20.7 crore).
V a l u a t i o n s
We expect the company’s profitability to improve due to its presence in key
business and leisure locations and reduction in the debt burden. At the
CMP of | 89, the stock is trading at 14.0x and 10.2x its FY12E and FY13E
EV/EBITDA, respectively. We value the stock at 12.0x FY13E EV/EBITDA and
arrive at a target price of | 102 with a BUY rating on it.
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