Mahindra Holidays & Resorts India - Ventura

We initiate coverage on Mahindra Holidays & Resorts India Ltd (MHRIL) as a BUY with a Price Objective of Rs.451 representing a potential upside of ~37.0% over a period of 15 months. At the CMP of Rs.329, the stock is trading at 23.7x and 19.0x its estimated earnings for FY13 and FY14 respectively.

MHRIL is the market leader in the Vacation Ownership (VO) industry and faces limited competition (other sizable player being Sterling Resorts). MHRIL is expected to witness healthy growth of 17.7% CAGR in its top-line to Rs.867.2 crore by FY14 on the back of acceleration in net member additions (13.4% CAGR). We believe that this acceleration is achievable owing to huge untapped opportunity for VO industry in India, adherence to its "Member First" policy and focus towards increasing room inventory (FY13 - ~600 rooms; FY14 - ~425 rooms).

While in the recent past, MHRIL was plagued by significant member cancellations, its refurbished business model coupled with increasing room inventory should help in stemming the attrition; boosting net member additions and consequently revenues.

Source : Equity Bulls

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