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B o t t o m l i n e d i v e s o n h i g h e r i n t e r e s t c o s t …
Hotel Leela came out with dismal Q1FY12 results. It reported net sales of
| 125 crore (up 18% YoY) mainly due to incremental revenue from its
new property at Chanakyapuri Delhi, which was opened in Q4FY11.
However, the growth was lower than our expectation mainly due to
subdued growth in ARR (industry average: up ~3% YoY) across business
destinations. Besides, operating costs significantly surged 40% YoY to |
104.1 crore due to higher operating cost like employee cost (up 51% YoY)
and other expenses (up 47% YoY). This resulted in a sharp decline in
operating profit by 35% YoY to | 20.6 crore. There has also been a sharp
rise in interest costs, which increased from | 5.6 crore last year to | 37
crore in Q1FY12. Due to this combined effect, the company reported a
loss of | 26.5 crore against net profit of | 9.2 crore reported in Q1FY11.
ƒ New room additions help in topline growth
Hotel Leela’s net sales recorded a growth of 18% YoY to | 125 crore
backed by incremental revenue from its new property at
Chanakyapuri. The occupancy rate in Mumbai and Bangalore rose
~100 bps YoY while ARR remained subdued (up ~3-4% YoY)
ƒ Higher operating cost and interest outgo takes a toll on profitability
Leela’s operating margin got squeezed significantly by ~1330 bps to
16.5% mainly due to a sharp rise in operating cost by 40% YoY to |
104.1 crore. Major cost drivers like raw material cost, employee cost
and other cost went up by 29%, 51% and 47% YoY to | 9.7 crore, |
37.3 crore and | 44.7 crore, respectively. Due to higher debt in its
book, interest cost surged sharply by 560% YoY to | 37 crore, which
finally hit the bottomline. Leela reported a net loss of | 26.5 crore
against profit of | 9.2 crore in the same period last year.
V a l u a t i o n
At the CMP of | 40, the stock is trading at 23.8x and 19.7x its EV/EBITDA
in FY12E and FY13E, respectively. Looking at the current situation, we
believe high debt burden and flattish growth in its ARRs (Delhi property)
for the coming two years would hit its return ratios. At CMP, it is trading
at premium valuations compared to its peers. We assign HOLD rating to
the stock with target price of | 36 (i.e. at 19.0x FY13E EV/EBITDA).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
B o t t o m l i n e d i v e s o n h i g h e r i n t e r e s t c o s t …
Hotel Leela came out with dismal Q1FY12 results. It reported net sales of
| 125 crore (up 18% YoY) mainly due to incremental revenue from its
new property at Chanakyapuri Delhi, which was opened in Q4FY11.
However, the growth was lower than our expectation mainly due to
subdued growth in ARR (industry average: up ~3% YoY) across business
destinations. Besides, operating costs significantly surged 40% YoY to |
104.1 crore due to higher operating cost like employee cost (up 51% YoY)
and other expenses (up 47% YoY). This resulted in a sharp decline in
operating profit by 35% YoY to | 20.6 crore. There has also been a sharp
rise in interest costs, which increased from | 5.6 crore last year to | 37
crore in Q1FY12. Due to this combined effect, the company reported a
loss of | 26.5 crore against net profit of | 9.2 crore reported in Q1FY11.
ƒ New room additions help in topline growth
Hotel Leela’s net sales recorded a growth of 18% YoY to | 125 crore
backed by incremental revenue from its new property at
Chanakyapuri. The occupancy rate in Mumbai and Bangalore rose
~100 bps YoY while ARR remained subdued (up ~3-4% YoY)
ƒ Higher operating cost and interest outgo takes a toll on profitability
Leela’s operating margin got squeezed significantly by ~1330 bps to
16.5% mainly due to a sharp rise in operating cost by 40% YoY to |
104.1 crore. Major cost drivers like raw material cost, employee cost
and other cost went up by 29%, 51% and 47% YoY to | 9.7 crore, |
37.3 crore and | 44.7 crore, respectively. Due to higher debt in its
book, interest cost surged sharply by 560% YoY to | 37 crore, which
finally hit the bottomline. Leela reported a net loss of | 26.5 crore
against profit of | 9.2 crore in the same period last year.
V a l u a t i o n
At the CMP of | 40, the stock is trading at 23.8x and 19.7x its EV/EBITDA
in FY12E and FY13E, respectively. Looking at the current situation, we
believe high debt burden and flattish growth in its ARRs (Delhi property)
for the coming two years would hit its return ratios. At CMP, it is trading
at premium valuations compared to its peers. We assign HOLD rating to
the stock with target price of | 36 (i.e. at 19.0x FY13E EV/EBITDA).
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