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E x c e p t i o n a l i t e m i nf l a t e s b o t t o m l i n e …
East India Hotels (EIH) reported net sales of | 237.2 crore during Q2FY12,
which was in line with our estimate | 239.1 crore while PAT of | 16.6
crore was above our estimate (I-direct estimate: | 4.6 crore) mainly due to
one time income of ~| 11 crore from sale of properties. Net sales grew
~9% YoY led by an improvement in occupancy (~100 bps YoY) across
business destinations. However, average room rate (ARR) growth
remained subdued to the extent of mere 2% YoY. On the other hand,
operating costs rose marginally by 2% YoY as a result of tight cost
control measures taken by the company at the operating level. As a
result, operating margins surged by 674 bps YoY to 12.4%. Finally, the
company reported a net profit of | 16.6 crore (loss of | 15 crore in
Q2FY11) on the back of a sharp decline in interest cost by ~70% YoY and
gains of | 11.2 crore from one-time income from sale of properties.
ƒ Moderate growth in topline due to seasonality
EIH’s topline grew ~9% YoY to | 237 crore during Q2FY12
supported by moderate growth in occupancy (~100 bps YoY).
However, average room rates remained flat on account of the lean
season and new supply across leading business destinations such
as Delhi, Chennai and Hyderabad.
ƒ Lower operating cost helps margin expansion
Operating cost in Q2FY12 increased a mere 2% YoY, an indication
of various cost control measure taken by the company. During the
period, raw material cost and other expenses grew by 14% YoY and
9% YoY to | 35.7 crore and | 69.9 crore, respectively, which was
partially offset by a decline in employee cost by ~8% YoY to | 82.2
crore. Consequently, operating profit grew exceptionally by 140%
YoY to | 29.4 crore, thus expanding margin by ~674 bps YoY.
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 | 95, the stock is trading at 15.3x and 12.2x its FY12E and
FY13E EV/EBITDA, respectively. We value the stock at 14x FY13E
EV/EBITDA and arrive at a target price of | 110 with a BUY rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
E x c e p t i o n a l i t e m i nf l a t e s b o t t o m l i n e …
East India Hotels (EIH) reported net sales of | 237.2 crore during Q2FY12,
which was in line with our estimate | 239.1 crore while PAT of | 16.6
crore was above our estimate (I-direct estimate: | 4.6 crore) mainly due to
one time income of ~| 11 crore from sale of properties. Net sales grew
~9% YoY led by an improvement in occupancy (~100 bps YoY) across
business destinations. However, average room rate (ARR) growth
remained subdued to the extent of mere 2% YoY. On the other hand,
operating costs rose marginally by 2% YoY as a result of tight cost
control measures taken by the company at the operating level. As a
result, operating margins surged by 674 bps YoY to 12.4%. Finally, the
company reported a net profit of | 16.6 crore (loss of | 15 crore in
Q2FY11) on the back of a sharp decline in interest cost by ~70% YoY and
gains of | 11.2 crore from one-time income from sale of properties.
ƒ Moderate growth in topline due to seasonality
EIH’s topline grew ~9% YoY to | 237 crore during Q2FY12
supported by moderate growth in occupancy (~100 bps YoY).
However, average room rates remained flat on account of the lean
season and new supply across leading business destinations such
as Delhi, Chennai and Hyderabad.
ƒ Lower operating cost helps margin expansion
Operating cost in Q2FY12 increased a mere 2% YoY, an indication
of various cost control measure taken by the company. During the
period, raw material cost and other expenses grew by 14% YoY and
9% YoY to | 35.7 crore and | 69.9 crore, respectively, which was
partially offset by a decline in employee cost by ~8% YoY to | 82.2
crore. Consequently, operating profit grew exceptionally by 140%
YoY to | 29.4 crore, thus expanding margin by ~674 bps YoY.
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 | 95, the stock is trading at 15.3x and 12.2x its FY12E and
FY13E EV/EBITDA, respectively. We value the stock at 14x FY13E
EV/EBITDA and arrive at a target price of | 110 with a BUY rating.
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