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H i g h e r i n t e r e s t c o s t t r i m s p r o f i t …
Royal Orchid Hotels reported its Q3FY12 results, which were in line with
our estimate on the revenue front. It surged by 6% YoY to | 43.5 crore (Idirect estimate: | 43.9 crore). The moderate growth in topline can mainly
be attributed to marginal growth in occupancy (~100 bps YoY) while ARR
remained flat during the same period. Further, there was a sharp rise in
the operating cost by 14% YoY due to a higher-than-expected rise in raw
material cost and other expenses by 17% YoY to | 5.3 crore and 15%
YoY to | 15.5 crore, respectively. As a result, the operating margin shrunk
~551 bps YoY to 24%. Finally, net profit declined 43% YoY to | 2.5 crore
(I-direct estimate: | 4.6 crore) mainly on account of a sharp increase in
interest costs that surged by 71% YoY to | 4.9 crore.
ƒ Moderate topline growth on subdued ARR
In Q3FY12, the topline grew a mere ~6% YoY to | 43.5 crore
mainly supported by ~100 bps YoY growth in occupancy while
average room rate (ARR) remained flat during the same period. The
lean business season and additional room supply (Pune and
Ahmedabad) hit the ARR across the regions.
ƒ Higher cost during quarter takes toll on margin
The company’s total operating cost increased by a notable 14% YoY
to | 33 crore during Q3FY12. This was supported by higher raw
material cost and other expense, which surged by 17% YoY and
15% YoY, respectively. As a result, the OPM dipped ~551 bps YoY
to 24%. Further, a dip in margin and higher interest cost (up 71%
YoY to | 4.9 crore) hit the bottomline, which declined by 43% YoY.
V a l u a t i o n s
At the CMP of | 54, the stock is trading at 12.5x and 10.6x its FY12E and
FY13E EV/EBITDA, respectively. We expect occupancy levels and ARR to
remain low due to excess supply of hotel rooms in cities where the
company has a presence. Considering this, we continue to value the stock
at 10x FY13 EV/EBITDA and maintain our target price of | 48 with a HOLD
rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CLICK here for PDF post link
H i g h e r i n t e r e s t c o s t t r i m s p r o f i t …
Royal Orchid Hotels reported its Q3FY12 results, which were in line with
our estimate on the revenue front. It surged by 6% YoY to | 43.5 crore (Idirect estimate: | 43.9 crore). The moderate growth in topline can mainly
be attributed to marginal growth in occupancy (~100 bps YoY) while ARR
remained flat during the same period. Further, there was a sharp rise in
the operating cost by 14% YoY due to a higher-than-expected rise in raw
material cost and other expenses by 17% YoY to | 5.3 crore and 15%
YoY to | 15.5 crore, respectively. As a result, the operating margin shrunk
~551 bps YoY to 24%. Finally, net profit declined 43% YoY to | 2.5 crore
(I-direct estimate: | 4.6 crore) mainly on account of a sharp increase in
interest costs that surged by 71% YoY to | 4.9 crore.
ƒ Moderate topline growth on subdued ARR
In Q3FY12, the topline grew a mere ~6% YoY to | 43.5 crore
mainly supported by ~100 bps YoY growth in occupancy while
average room rate (ARR) remained flat during the same period. The
lean business season and additional room supply (Pune and
Ahmedabad) hit the ARR across the regions.
ƒ Higher cost during quarter takes toll on margin
The company’s total operating cost increased by a notable 14% YoY
to | 33 crore during Q3FY12. This was supported by higher raw
material cost and other expense, which surged by 17% YoY and
15% YoY, respectively. As a result, the OPM dipped ~551 bps YoY
to 24%. Further, a dip in margin and higher interest cost (up 71%
YoY to | 4.9 crore) hit the bottomline, which declined by 43% YoY.
V a l u a t i o n s
At the CMP of | 54, the stock is trading at 12.5x and 10.6x its FY12E and
FY13E EV/EBITDA, respectively. We expect occupancy levels and ARR to
remain low due to excess supply of hotel rooms in cities where the
company has a presence. Considering this, we continue to value the stock
at 10x FY13 EV/EBITDA and maintain our target price of | 48 with a HOLD
rating
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