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Research
Indian Hotels - Subdued performance continues... - ICICIdirect
Posted On : 2012-08-11 07:08:41( TIMEZONE : IST )
IHCL posted a modest growth in revenues in Q1FY13 but fell short of our PAT estimates for the quarter ended Q1FY13. Company reported standalone revenues of Rs. 396.5 crore (up by 7.3% YoY) that remained more or less inline with our estimates. Operating margins for the quarter declined 30 bps YoY largely due higher fixed overhead costs related to opening of new hotel at Yashwantpur, Bangalore. While standalone PAT for the quarter declined sharply by 69% YoY due to lower treasury income (down by 45% YoY) and forex loss of Rs.6.4 crore on long term borrowings. Barring this, the operating standalone performance remained more or less inline. However, on a consolidated basis, company reported net loss of Rs.33.3 crore (v/s loss of Rs22.3 crore last year) on account of subdued environment in its overseas business.
Topline driven by new room additions, RevPar remains flat YoY
IHCL's standalone topline grew ~7.4% YoY supported by additional revenue from new room additions (in Yashwantpur) and flat RevPar. Baring few cities like North Mumbai, Kolkata, Goa, Pune and Agra, all other major cities reported marginal fall in average occupancy.
Profitability of subsidiaries remains a concern
Profitability of subsidiary companies continues to remain concern due to slowdown. The topline growth of 20% YoY on consolidated basis is mainly attributed to consolidation of Piem Hotels Ltd (A subsidiary company) and stable standalone performance.
Most negatives priced in, maintain HOLD rating
At CMP of Rs.60, the stock trades at 8.9x FY14E EV/EBITDA and EV of Rs.0.95 crore per room. We continue to remain conservative on the earnings growth front till we see some sign of recovery in its international operations. However, we believe, the most of the negatives about low earnings visibility have already been priced in at this level. Hence, by assigning value to the asset, we maintain our target price Rs.63 with a 'HOLD' rating (ie. at an EV of Rs.1 crore per room, discounting its premium asset valuations by 50%).
