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N e w k e y a d d i t i o n s d r i v e t o p l i n e …
Royal Orchid Hotels came out with a disappointing set of numbers for
Q1FY12. The company reported net sales of | 35.6 crore (14% YoY
growth) that was below our estimated net sales of | 39.2 crore on account
of lower-than-expected pick-up in demand for hotel rooms. Operating
margins witnessed some improvement but that was mainly backed by
various cost control measures adopted by the company during the
quarter. It improved by 191 bps YoY to 18.5%. However, that was below
our expectations (I-direct estimate: 24.7%). Among major cost
components, other operating costs saw a sharp increase of 22% YoY to |
14.1 crore while other costs (i.e. employee, raw material and rent)
remained more or less same as that of last year. There has also been a
sharp increase in interest costs from | 1.9 crore to | 3.4 crore compared
to last year. As a result, net profit for the quarter dipped ~77% YoY to |
0.23 crore.
ƒ Incremental revenue flow from new hotels drive topline
Royal Orchid’s Q1FY12 topline grew ~14% YoY to | 35.6 crore
mainly driven by incremental revenue from its new hotels opened in
Hyderabad, Jaipur and Hospet (Karnataka).
ƒ Cost control measures facilitate margin expansion to some extent
The company’s total operating cost increased only 11% YoY to | 29
crore during Q1FY12, mainly due to adoption of various cost control
measures. As a result, OPM expanded by 191 bps YoY to 18.5%.
V a l u a t i o n
At the CMP of | 65, the stock is trading at 9.5x and 8.1x its FY12E and
FY13E EV/EBITDA, respectively. We expect occupancy levels to remain
low due to the lean season and excess supply of hotel rooms in cities
where the company has a presence. Hence, revenue growth (i.e. 18%
CAGR FY11-13E) would mainly come from addition of new hotels in
Jaipur, Hyderabad and in Mumbai (in Q4FY12). We are downgrading our
rating on the stock to HOLD with a price target of | 70 (i.e. at 8.5x FY13E
EV/EBITDA).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
N e w k e y a d d i t i o n s d r i v e t o p l i n e …
Royal Orchid Hotels came out with a disappointing set of numbers for
Q1FY12. The company reported net sales of | 35.6 crore (14% YoY
growth) that was below our estimated net sales of | 39.2 crore on account
of lower-than-expected pick-up in demand for hotel rooms. Operating
margins witnessed some improvement but that was mainly backed by
various cost control measures adopted by the company during the
quarter. It improved by 191 bps YoY to 18.5%. However, that was below
our expectations (I-direct estimate: 24.7%). Among major cost
components, other operating costs saw a sharp increase of 22% YoY to |
14.1 crore while other costs (i.e. employee, raw material and rent)
remained more or less same as that of last year. There has also been a
sharp increase in interest costs from | 1.9 crore to | 3.4 crore compared
to last year. As a result, net profit for the quarter dipped ~77% YoY to |
0.23 crore.
ƒ Incremental revenue flow from new hotels drive topline
Royal Orchid’s Q1FY12 topline grew ~14% YoY to | 35.6 crore
mainly driven by incremental revenue from its new hotels opened in
Hyderabad, Jaipur and Hospet (Karnataka).
ƒ Cost control measures facilitate margin expansion to some extent
The company’s total operating cost increased only 11% YoY to | 29
crore during Q1FY12, mainly due to adoption of various cost control
measures. As a result, OPM expanded by 191 bps YoY to 18.5%.
V a l u a t i o n
At the CMP of | 65, the stock is trading at 9.5x and 8.1x its FY12E and
FY13E EV/EBITDA, respectively. We expect occupancy levels to remain
low due to the lean season and excess supply of hotel rooms in cities
where the company has a presence. Hence, revenue growth (i.e. 18%
CAGR FY11-13E) would mainly come from addition of new hotels in
Jaipur, Hyderabad and in Mumbai (in Q4FY12). We are downgrading our
rating on the stock to HOLD with a price target of | 70 (i.e. at 8.5x FY13E
EV/EBITDA).
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