Hotels ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link

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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Hotels
ƒ Revenue growth to remain moderate at ~6% YoY in Q4FY12E
Despite this being a peak season for the hotel industry, major hotel
players under our coverage are expected to report a moderate growth
of ~5-6% YoY in topline during Q4FY12E. Addition of new room supply
over the years with moderate room demand during the quarter
suppressed average room rate (ARR) growth to the tune of ~3-4% YoY
while occupancy is expected to  be ~75% YoY (up ~200 bps YoY)
mainly backed by growth in leisure destinations.
ƒ EBITDA margin to remain flat YoY
EBITDA is expected to grow by a mere 4% YoY on account of a
moderate rise in operating cost. We expect the I-direct hotel universe
operating cost to increase ~5% YoY (marginally lower than sales
growth). Major hoteliers like Indian Hotels are expected to report
EBITDA margins of 34% (down ~ 139 bps YoY) while EIH is expected to
report EBITDA margin of 31% (up ~190 bps YoY), respectively,
benefiting mainly from their geographical mix.
ƒ Net profit to decline 8% YoY led by sharp fall in EIH’s profitability
Companies under the I-direct coverage are expected to report net profit
of ~| 163 crore in Q4FY12E, (down ~8% YoY) due to higher interest
and depreciation cost. Under our coverage, we expect net profit of
Indian Hotels to remain flat YoY while EIH’s net profit is expected to
decline 26% YoY to | 50 core mainly due to a sharp decline in other
income during Q4FY12E. Small hotel players like Royal Orchid are
expected to report net profit growth of ~2% YoY while Kamat Hotels is
expected to report a net profit of about | 0.2 crore against a loss of | 1.4
crore reported in during Q4FY11.
ƒ Leisure and select business destinations to drive growth in Q4
Leisure destinations such as Agra,  Goa,  Jaipur  and  Kerala  witnessed
occupancy growth of ~300 bps YoY to 80% from 77% during Q4FY12,
mainly on account of the holiday season. Among business destinations,
South Mumbai, NCR and Kolkata also witnessed occupancy growth up
to ~300 bps YoY to 78% from 75% during Q4FY12 driven by an
increase in MICE (meeting, incentives, conferencing, and exhibitions)
activities



Company specific view
EIH Revenues are expected to grow by 6% YoY (9% QoQ), due to a rise in room inventory
in Hyderabad. We expect ~200 bps YoY growth in occupancy with ~3% YoY rise in
ARR. The EBITDA margin is expected to improve ~190 bps YoY while profit is
expected to decline ~26% YoY due to a sharp fall in other income
Indian Hotels We expect revenue growth of 5% YoY on the back of growth in occupancy (~200 bps
YoY) and marginal rise in blended ARR (3% YoY). The operating margin is expected to
decline by 139 bps YoY due to a 7% YoY rise in operating cost and moderate revenue
growth
Kamat Hotel Revenues are expected to grow ~6% YoY supported by ~3% YoY rise in ARR and
~150 bps YoY. Margins are expected to improve by 300 bps YoY due to lower
operating cost. However, profitability will get impacted on account of higher interest
and depreciation cost due to commissioning of new rooms
Royal Orchid
Hotel
Revenues are expected to grow 5% YoY due to marginal growth in occupancy and
ARR by ~100 bps YoY and 3% YoY, respectively. However, a 7% YoY rise in operating
cost will dent margin by~139 bps YoY. We expect net profit growth of mere ~2%
YoY in Q4FY12
Taj GVK Hotel We expect net revenue growth of 6% YoY mainly due to new room additions and
~2% YoY growth in ARR. Occupancy is expected to remained flat across the
Hyderabad region due to higher room supply. Operating profit is expected to dip
~12% YoY due to higher fixed cost from newly opened hotels
Source: ICICIdirect.com Research