Taj GVK Hotels - Long term growth visibility intact… :: ICICI Securities, report

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BUY Taj GVK Hotels, :: ICICI Securities,

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SREI infra, TTK Prestige, BHEL, Bajaj Hindusthan, Assam company, Taj GVK Hotels:: Business Line

Angel Broking - TajGVK - RU4QFY2012 - Result Updates :PDF Link

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TajGVK - RU4QFY2012

Hold Taj GVK Hotels; Target : Rs 80 ::ICICI Securities

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RATING....................................................................................... Changed from Buy to Hold

S u p p l y ove rhang a d d ing   t o   w o e s …
Taj GVK reported its Q3FY12 results, which were below our estimates.
The topline declined ~6% YoY to | 66.3 crore (I-direct estimate: | 73
crore) while it reported PAT of | 6.10 crore, down by 53% YoY (I-direct
estimate: | 13 crore). The dismal performance of the company can mainly
be attributed to YoY de-growth in occupancy and average room rate
(ARR) across the Hyderabad region. On the cost front, total operating cost
surged ~12% YoY to | 47.4 crore due to a rise in employee cost and P&F
cost by 27% and 9%, respectively. The cost has increased mainly due to
incurring of pre operating expenses on new hotel launch during Q3FY12.
Finally, PAT during the quarter saw a significant drop of 53% YoY to | 6.1
crore, due to a decline in topline and operating margin.
ƒ Supply glut and lean business season hit topline
Taj GVK’s topline was manly hit by de-growth in occupancy (down
~700 bps YoY) and muted ARR across the Hyderabad region, which
suffered from supply overhang and the lean season for business.
However, Chennai recorded occupancy growth of ~600 bps YoY to
71% for the quarter.
ƒ Drop in sales and higher cost dent margin
The operating margin dipped ~1100 bps YoY to ~29% for the
quarter due to a drop in sales (down ~6% YoY) and higher
operating cost, which increased by 12% YoY to | 47.4 crore (due to
pre-operating expenses on new hotel launch at Begumpet
{Hyderabad}). Major cost drivers such as employee costs and P&F
costs surged by 27% and 9% YoY, respectively.
V a l u a t i o n s
At the CMP of | 74, the stock is trading at 7.2x and 6.0x its FY12E and
FY13E EV/EBITDA, respectively. We have reduced our revenue growth
estimate by ~2% and ~7% YoY for FY12E and FY13E, respectively,
considering the supply overhang across the Hyderabad region, which
squeezed the ARR growth. Hence, we have reduced our price target to
| 80 (i.e. at 6.5x FY13E EV/EBITDA) with a HOLD rating.

TajGVK (CMP: `86/ TP: `121/ Upside: 41%) :: Angel Model Portfolio: November 2011

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􀂄 TajGVK is the market leader in the Hyderabad market, where it has a share of
nearly 30% in premium-segment rooms. The company will start operations at its
Begumpet property in 3QFY2012, which will strengthen its foothold further and
help the company to tap mid-market room demand.
􀂄 TajGVK is adding 189 rooms at its Begumpet property, using an asset-light strategy.
This would require a lower capital outlay as compared to a Greenfield expansion.
We expect TajGVK's debt-equity ratio to be comfortable at 0.2x in FY2013E, which
provides the company adequate room to plan further expansions, without hampering
its balance sheet quality.
􀂄 We maintain our positive outlook on the entire hotel industry, as increasing FTAs
and economic growth will lead to a further increase in demand for hotel rooms.
With the tourist season coming in, TajGVK is expected to take full advantage from
its expansion plans in Hyderabad, which will take its owned rooms to 1,086 in
3QFY2012 from 897 currently.
􀂄 The stock is currently trading at attractive valuation of 8.5x its FY2013E EPS.
We maintain our Buy view with a target price of `121, valuing it at 12x FY2013E EPS.

Buy Taj GVK Hotels; Target : Rs 110 ::ICICI Securities

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D i s m a l   p e r f o r m a n c e   o n  l o w e r   o c c u p a n c y …
Taj GVK reported its Q2FY12 results, which were in line with our estimate
on the revenue front, which remained flat (down ~1% YoY) at | 59.2
crore (I-direct estimate: | 57.4 crore) while PAT at | 4.3 crore was below
our estimate of | 7.7 crore. The muted topline growth can mainly be
attributed to lower growth in occupancy and average room rate (ARR)
across the Hyderabad region. However, operating profit increased by a
marginal 1% YoY on the back of a  dip in raw material cost and other
expenses by 5% each, which led to a decline in the total operating cost
by 2% YoY. Operating margins during Q2FY12 surged by 68 bps YoY to
33%. Finally, PAT during the quarter saw a significant drop of 42% YoY to
| 4.3 crore, on the back of a rise in tax expenses by 82% YoY as the
company made deferred tax provision of | 7.03 crore in Q2FY12.
ƒ Topline hit by lean season coupled with political disruptions
Taj GVK’s topline was primarily hit by lower occupancy (down by
~550 bps YoY) and muted ARR across the Hyderabad region, which
suffered from the Telangana agitation. However, Chandigarh and
Chennai recorded higher occupancy levels of 67% and 63%,
respectively, for the quarter.
ƒ Cost control measure helps in margin expansion
The operating margin expanded by 68 bps YoY to 33% for the
quarter due to a decline in operating expenditure by 2% YoY to |
39.7 crore. Major cost driver such as employee cost and P&F cost
surged by 1% and 7% YoY, respectively, which was partially offset
by a decline in raw material cost & other expenses by 5% YoY each.
V a l u a t i o n s
At the CMP of | 92, the stock is trading at 8.1x and 6.8x its FY12E and
FY13E EV/EBITDA, respectively. We believe  the  concern on room supply
and political disruption in Hyderabad have been  factored in the price.
The company is expected to  maintain its market share in our forecast
period of FY11-13E due  to its  competitive  room  rates.  Hence, we have
maintained our price target of | 110 (i.e. at 8x FY13E EV/EBITDA) with a
BUY rating

BUY TAJ GVK Hotels Resorts Ltd; Target 115 :: Anand Rathi

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Investment Rationale
~ Top properties and Location Preferences
~ Expansion plans
~ Improving Financial Performance
~ Improving Industry outlook
Company Description
TAJGVK Hotels & Resorts Limited (TAJGVK) is a joint venture,
formed through a Strategic Alliance, between the Indian Hotels
Company Limited (IHCL) and the Hyderabad based GVK Group in
the year 1999/00. GVK Group is a Hyderabad based multi product
and multi-location business conglomerate with several integrated
companies in India and abroad. IHCL is a TATA enterprise with a
chain of hotels owning the Taj Group of Hotels and manages and
operates various hotels across the country and abroad. The
Company owns & operates three five star hotels in Hyderabad and
one five star hotel each in the cities of Chennai and Chandigarh. With
5 world class properties it has a room base of over 900 rooms.
Valuations
The industry and the company’s performance is improving gradually.
On a short term basis with festive season and the Debutant Formula
race event will improve the performance of the companies in this
industry for next couple of quarters as well. Currently the stock is
trading below its median PE of last 5 years. At CMP the stock trades
at 11.51x for FY12E and 9.80x for FY13E earnings. We see price
target of Rs.115 for a longer term perspective.

Hold Taj GVK Hotels; Target : Rs 110::ICICI Securities

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Taj GVK Hotels

L  o w e r   o c c  u  p a  n c  y   h i t   t o p  l i n e …
Taj GVK’s growth in Q1FY12 remained lower than our expectations with
decline in revenue by 3.4% YoY.  The company posted net revenues of |
58.9 crore as against our estimated  net revenues of | 69.8 crore. The
growth remained subdued mainly due to subdued occupancy level and flat
room rates (ARRs). However, operating expenses at | 38.4 crore remained
flat YoY as growth in employee cost and fuel cost by 6% YoY and 2% YoY
was offset by a decline in raw material cost and other cost by 4% and 1%,
respectively. Operating margins during Q1FY12 declined by 222 bps YoY to
34.8%. Net profit for the quarter surged by 19% YoY to | 12 crore, due to
tax benefit for capital expenditure incurred for Taj-Begumpet.
ƒ Occupancy de-growth, flat ARR dent topline
The decline in revenues during Q1FY12 was mainly led by a
downward pressure in occupancy  and flat ARR due to political
disruption in the Hyderabad region. Hyderabad reported average
occupancy levels of 56% for the quarter while Chandigarh and
Chennai recorded higher occupancy levels of 75% and 63%,
respectively, for the quarter.
ƒ Margin pressure continues on lower topline growth
The operating margin stood at 34.8% for the quarter that remained
under pressure on account of lower-than-expected growth in sales.
However, reduction in raw material costs (down 4% YoY) and other
expenses (down 1% YoY) restricted further erosion in margins.
V a l u a t i o n s
At the CMP of | 99, the stock is trading at 8.6x and 6.7x its FY12E and
FY13E EV/EBITDA, respectively. Despite concerns over rise in room supply
in Hyderabad, Taj GVK is expected to maintain its market share in our
forecast period of FY10-13E as it is competitively positioned in terms of
room rates against its competitors. Hence, we have maintained our HOLD
rating on it with a target price of | 110 (i.e. at 7.3x FY13E EV/EBITDA).

Taj GVK Hotels & Resorts - results in line with estimates; Buy :: Edelweiss

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􀂄 Limited supply in key markets in future
Taj GVK Hotels & Resorts (Taj GVK) reported INR 691 mn sales, up 9.8% Y-o-Y,
but down 1.5% Q-o-Q. It posted ORs of 64-79% for its hotels in Hyderabad
against 75% in Chennai and 74% in Chandigarh. ARRs grew flat-to-marginally,
both Q-o-Q and Y-o-Y. The company sounded cautious on any big jump in ARRs
and mentioned that 5% rise is certain; beyond that it is difficult to comment. No
major supply is expected in Hyderabad in the next 1-2 years. In Chennai, supply
is coming in at INR 10,000 plus range, where as Taj GVK works at sub INR 5,500.
In Chandigarh, JW Marriott is coming up with a 300-room hotel in FY13.

Taj GVK Hotels: Moderate growth, muted outlook… ICICI Securities

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Moderate growth, muted outlook…
Taj GVK’s growth in Q4FY11 remained lower than our expectations with
only a 10% YoY increase in revenues. The company posted net revenues of
| 69.7 crore as against our estimated net revenues of | 72.7 crore. The
growth remained subdued mainly because of muted room rates (ARRs).
However, improved occupancy levels facilitated the company to grow its
topline by 10% YoY. Operating margins for the quarter declined by 181 bps
YoY to 39.7%. This was mainly on account of higher employee and F&B
costs that increased by 25.5% and 12.3% YoY, respectively. Net profit for
the quarter stood at | 12.9 crore, increasing marginally by 4.4% YoY.

TAJ GVK HOTELS & RESORTS Disappointing results; recovery taking time : Edelweiss

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TAJ GVK HOTELS & RESORTS
Disappointing results; recovery taking time


􀂄 Average sales growth; gradual recovery
Taj GVK Hotels & Resorts (Taj GVK) reported INR 701 mn sales, up 9% Y-o-Y and
17% Q-o-Q. It posted ORs of 65-75% for its hotels in Hyderabad against 65% in
Chennai and 77% in Chandigarh. ARRs grew flat to marginally, both Q-o-Q and Yo-
Y. The company sounded cautious on any big jump in ARRs, as there is enough
supply coming in the next 2-3 years across its major markets - Hyderabad,
Chennai and Chandigarh. With the MICE segment doing extremely well in
Hyderabad, the company is hopeful of getting strong business from the
conferences happening in the city. However, due to less-than-expected uptick in
ARRs in 9mFY11, we expect zero growth in ARRs (5% estimated earlier). For FY12
too, we revise down our ARR growth estimates to 5% from 10%.

Add Taj GVK Hotels -Capacity additions drive revenue growth…Target :108:: ICICI Securities

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Taj GVK Hotels -Capacity additions drive revenue growth…
Taj GVK Hotels came out with its Q3FY11 numbers that remained
marginally above our estimates. The company reported net revenues of
| 70.2 crore, up 9.4% YoY, as against our expected net revenues of |
68.3 crore. The revenue growth mainly came from incremental revenues
from the new Chennai hotel property and partially from the rise in
average occupancy levels that increased from 64% in Q3FY10 to 68% in
Q3FY11. However, operating margins witnessed a marginal contraction
of 79 bps YoY on account of incurring of higher operating costs
connected with the new hotel. As a result, net profit for the quarter
grew 5.9% YoY to | 12.9 crore.

Buy TajGVK; Target Rs. 197– 3QFY2011 Result Update - Angel Broking

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 TajGVK – 3QFY2011 Result Update

Angel Broking maintains a Buy on TajGVK with a Target Price of Rs. 197.

For 3QFY2011, TajGVK reported top-line growth of 9.2% yoy to `70cr (`64cr),
below our estimates of `76cr, primarily on account on lower-than-expected
occupancy rates (OR) and average room rate (ARR) in Hyderabad hotels. OPM at
39.6% also came in below our estimates of 41.0%. PAT increased by 5.9% yoy to
`13cr (`12cr), as against our expectations of `15cr. Overall, OR increased to
68%, compared to 64% in 3QFY2010. Going ahead, we expect the company to
improve on its key operating parameters. We maintain Buy on the stock.

Taj GVK – 2QFY2011 Result Update: Angel Broking

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For 2QFY2011, Taj GVK reported lower-than-expected sales growth of 11.2%
yoy. The below-expectation growth was mainly due to slower-than-expected
ramp-up in occupancy rates (OR) and average room rates (ARR) in Hyderabad
hotels. Going ahead, we expect the company’s operating environment to
improve. Hence, we continue to maintain our Buy rating on the stock.

TAJ GVK HOTELS & RESORTS Muted quarter:: Edelweiss

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TAJ GVK HOTELS & RESORTS
Muted quarter; busy season ahead



􀂄 Muted sales growth; H2FY11 to be exciting
Taj GVK Hotels & Resorts (Taj GVK) reported INR 598 mn sales, 11.8% Y-o-Y
growth and 1.4% sequential decline. The company posted ORs of 65% for its
hotels in Hyderabad compared to 52% in the other major city hotels. Chandigarh
clocked 65% and Chennai 57% ORs for the quarter. ARRs were flat on sequential
basis due to seasonal factor. The company is expected to increase ARRs between
5% and 10% across all its properties in H2FY11E with ORs of 70-75%. With the
MICE segment doing extremely well in Hyderabad city, H2FY11 is expected to be
eventful. We maintain our 70% ORs and 5% increase in ARRs for FY11E, although
we believe due to the out-performance of Chennai hotel, we could see some
upward revision.
􀂄 Slight dip in EBIDTA margins; busy season ahead
The company reported 32% EBIDTA margins compared to 35% in Q2FY10 and
37% in Q1FY11. Due to slight increase in employee and other expenses, margins
have declined. With the expected increase in ARRs in H2FY11 along with better
ORs, we maintain our EBIDTA margin estimates of 42% and 42.5% for FY11 and
FY12, respectively. In H1FY11, PAT margins were 14.5% and we maintain our
20.4% and 21.4% PAT margin estimates for FY11 and FY12, respectively.
􀂄 Begumpet and Krishna expansion on track
Capex of INR 900 mn at Begumpet with 190 rooms is on track and is expected to
be commissioned in Q4YF11. Along with this, the INR 200 mn car parking facility
expansion at Taj Krishna is also running on track for Q4FY11 opening. Due to the
increased demand for convention centers and banqueting facilities at Hyderabad,
the company is planning a convention center at the joint premises of Deccan,
Hyderabad and Taj Krishna. The new car parking facility will help the company tap
this fast emerging banqueting opportunity.
􀂄 Outlook and valuations: Positive; maintain ‘BUY’
With its leadership position in the CBD area of Hyderabad, Taj GVK is
strengthening it further by adding new facilities. With ARRs hike in H2FY11 along
with healthy demand from the MICE segment, we believe the company is in a
sweet spot. At CMP of INR 152, the stock is currently trading at EV/EBIDTA of
9.1x and 7.0x FY11E and FY12E, respectively. On a replacement cost basis, the
company is trading at INR 10 mn FY12E, one of cheapest in the entire industry.
We maintain our ‘BUY’ recommendation with price target of INR 220.