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H i g h e r s u p p l y k e e p s c h e c k o n o c c u p a n c y…
Indian Hotels Company (IHCL) came out with its Q3FY12 results wherein
the company reported standalone net revenues of ~| 521.5 crore (up
~7.4% YoY) in line with our estimate of | 518.5 crore. However, the PAT
of | 50.5 crore (vs. profit of | 50.3 crore in Q3FY11) was a bit below our
estimate of | 58.7 crore mainly on account of a squeeze in margins and
some exceptional losses. The operating margin dipped by 270 bps YoY to
27.0% mainly on the back of a rise in employee, raw material and other
cost by 16%, 10% and 9% YoY, respectively. Besides this, the company
also incurred an exceptional loss of | 14.8 crore (i.e. notional forex loss of
| 6.8 crore on forex loans due to adverse currency movement and a
shortfall in interruption claim of | 8.0 crore). As a result, its net profit
growth remained flat compared to last year.
ƒ New room additions and marginal rise in occupancy drives topline
IHCL increased its room count by ~10% YoY in Q3FY12. This, along
with a marginal rise in occupancy, has led to topline growth of
~7.4% YoY to | 521.5 crore on a standalone basis. Among regions,
cities such as Goa, Mumbai and Hyderabad recorded higher growth
in RevPAR whereas a drop in ARRs was visible in Chennai and Delhi.
The slowdown in recovery was primarily due to oversupply of
rooms particularly in Delhi, Chennai, Hyderabad, Bangalore and
Pune. Mumbai was the only metro, which showed an improvement
in occupancy (OR) albeit with flat room rates.
ƒ Higher operating costs dent operating margins
IHCL’s operating profit declined by 2.5% YoY to | 140.7 crore as
operating cost remained at a higher level with 11.6% YoY growth at
~| 380 crore. Among major cost drivers, raw material, employee
and other costs surged by 16%, 10% and 9% YoY, respectively.
V a l u a t i o n s
We have lowered our FY13E target multiple factoring the risk of delayed
recovery on the international business front and supply pressure on the
domestic side. We value the stock at 10x FY13E EV/EBITDA (earlier
valued at 12x) and arrive at a target price of | 70 with a HOLD rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H i g h e r s u p p l y k e e p s c h e c k o n o c c u p a n c y…
Indian Hotels Company (IHCL) came out with its Q3FY12 results wherein
the company reported standalone net revenues of ~| 521.5 crore (up
~7.4% YoY) in line with our estimate of | 518.5 crore. However, the PAT
of | 50.5 crore (vs. profit of | 50.3 crore in Q3FY11) was a bit below our
estimate of | 58.7 crore mainly on account of a squeeze in margins and
some exceptional losses. The operating margin dipped by 270 bps YoY to
27.0% mainly on the back of a rise in employee, raw material and other
cost by 16%, 10% and 9% YoY, respectively. Besides this, the company
also incurred an exceptional loss of | 14.8 crore (i.e. notional forex loss of
| 6.8 crore on forex loans due to adverse currency movement and a
shortfall in interruption claim of | 8.0 crore). As a result, its net profit
growth remained flat compared to last year.
ƒ New room additions and marginal rise in occupancy drives topline
IHCL increased its room count by ~10% YoY in Q3FY12. This, along
with a marginal rise in occupancy, has led to topline growth of
~7.4% YoY to | 521.5 crore on a standalone basis. Among regions,
cities such as Goa, Mumbai and Hyderabad recorded higher growth
in RevPAR whereas a drop in ARRs was visible in Chennai and Delhi.
The slowdown in recovery was primarily due to oversupply of
rooms particularly in Delhi, Chennai, Hyderabad, Bangalore and
Pune. Mumbai was the only metro, which showed an improvement
in occupancy (OR) albeit with flat room rates.
ƒ Higher operating costs dent operating margins
IHCL’s operating profit declined by 2.5% YoY to | 140.7 crore as
operating cost remained at a higher level with 11.6% YoY growth at
~| 380 crore. Among major cost drivers, raw material, employee
and other costs surged by 16%, 10% and 9% YoY, respectively.
V a l u a t i o n s
We have lowered our FY13E target multiple factoring the risk of delayed
recovery on the international business front and supply pressure on the
domestic side. We value the stock at 10x FY13E EV/EBITDA (earlier
valued at 12x) and arrive at a target price of | 70 with a HOLD rating
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