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I n t e r e s t c o s t s a v i n g d r i v e s b o t t o m l i n e …
East India Hotels (EIH) reported its Q3FY12 numbers, which were in line
with our estimates. EIH reported net sales of ~| 314 crore during Q3FY12
(I-direct estimate: ~| 317 crore) and EBITDA of | ~102 crore (I-direct
estimate: ~| 103 crore). Net sales surged mere ~4% YoY due to a
marginal rise in occupancy. However, average room rate (ARR) growth
remained subdued during the same period. Also, operating costs rose 8%
YoY to ~| 212 crore on account of ~12% YoY increase in both raw
material cost and power and fuel cost. This, in turn, dented the operating
margin by ~235 bps YoY. However, the company reported a net profit
growth of 59% YoY to | 45 crore (I-direct estimate: ~ | 51 crore) on the
back of a sharp decline in interest cost by ~70% YoY to ~ | 12 crore.
ƒ Moderate growth in topline due to subdued ARR
EIH reported moderate topline growth ~4% YoY to | 314 crore
during Q3FY12 supported by a marginal rise in occupancy.
However, due to seasonality, ARR across leisure destinations surged
~4-5% YoY, which negated the impact of subdued ARR across
business destinations for the same period. The slowdown in
recovery was primarily due to oversupply of rooms particularly
across business and leisure destinations, which hurt ARR growth.
ƒ Higher operating cost takes toll on margin
Operating cost in Q3FY12 increased ~8% YoY, supported by ~12%
YoY increase in both raw material cost and power and fuel cost to
~| 41 crore and ~| 20 crore, respectively. Consequently, the
operating profit dipped marginally by 3% YoY to ~| 102 crore and
margin fell by ~235 bps YoY to ~32%.
V a l u a t i o n s
We expect EIH’s profitability to improve due to its presence in key
business and leisure locations and reduction in the debt burden. At the
CMP of | 91, the stock is trading at 14.6x and 11.6x its FY12E and FY13E
EV/EBITDA, respectively. We continue to value the stock at 14x FY13E
EV/EBITDA and maintain our target price of | 110 with a BUY rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
I n t e r e s t c o s t s a v i n g d r i v e s b o t t o m l i n e …
East India Hotels (EIH) reported its Q3FY12 numbers, which were in line
with our estimates. EIH reported net sales of ~| 314 crore during Q3FY12
(I-direct estimate: ~| 317 crore) and EBITDA of | ~102 crore (I-direct
estimate: ~| 103 crore). Net sales surged mere ~4% YoY due to a
marginal rise in occupancy. However, average room rate (ARR) growth
remained subdued during the same period. Also, operating costs rose 8%
YoY to ~| 212 crore on account of ~12% YoY increase in both raw
material cost and power and fuel cost. This, in turn, dented the operating
margin by ~235 bps YoY. However, the company reported a net profit
growth of 59% YoY to | 45 crore (I-direct estimate: ~ | 51 crore) on the
back of a sharp decline in interest cost by ~70% YoY to ~ | 12 crore.
ƒ Moderate growth in topline due to subdued ARR
EIH reported moderate topline growth ~4% YoY to | 314 crore
during Q3FY12 supported by a marginal rise in occupancy.
However, due to seasonality, ARR across leisure destinations surged
~4-5% YoY, which negated the impact of subdued ARR across
business destinations for the same period. The slowdown in
recovery was primarily due to oversupply of rooms particularly
across business and leisure destinations, which hurt ARR growth.
ƒ Higher operating cost takes toll on margin
Operating cost in Q3FY12 increased ~8% YoY, supported by ~12%
YoY increase in both raw material cost and power and fuel cost to
~| 41 crore and ~| 20 crore, respectively. Consequently, the
operating profit dipped marginally by 3% YoY to ~| 102 crore and
margin fell by ~235 bps YoY to ~32%.
V a l u a t i o n s
We expect EIH’s profitability to improve due to its presence in key
business and leisure locations and reduction in the debt burden. At the
CMP of | 91, the stock is trading at 14.6x and 11.6x its FY12E and FY13E
EV/EBITDA, respectively. We continue to value the stock at 14x FY13E
EV/EBITDA and maintain our target price of | 110 with a BUY rating.
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