Cox & Kings - Better times ahead - ElaraCapital

Visibility improves for education, camping business & Leisure

The company has indicated that an education business (~30% of consolidated revenue in FY13) is currently 76% booked for FY14 season. Leisure tours- International (32% of consolidated revenue) is also likely to show healthy growth as Superbreak (short break holiday-30% of segment) forward bookings are 3% YoY higher and Dubai business (15% of the segment) is likely to be robust (after 30% YoY growth in FY13). The camping bookings (~17% of consolidated revenue) are 6% YoY higher with 90% booking already achieved for FY14. The cost reduction initiatives have improved margins of education & camping business in Q4FY13.

Domestic business shows muted sales on flattish inbound

The domestic business (~20% of consolidated business) has reported muted sales growth of 4.9% YoY due to flattish inbound season. The Q4FY13 is basically driven by inbound tourism. MICE (meetings, incentives, conferences and exhibitions) business has grown strongly both in Q4 and FY13. The tepid sales growth and higher employee cost have dragged down EBITDA margin by 790bps YoY (46% in Q4FY13).

Maintain Buy rating with target price of INR 205

The strategic focus of the company is to reduce debt, improving working capital and margins expansion through cost saving initiatives. The company has also taken initiatives to reduce working capital requirement for FY14 through shortening the BSP (billing settlement & plan) cycle. The key overhang of higher debt is likely to be addressed by higher operating cashflow. The hive off of camping business (segment of HolidayBreak) is also a possibility of debt reduction plan in next 2 years. We continue to maintain Buy rating on the stock with target price of INR 205 (equal weightage of 8X FY15 P/E and 6x FY15EV/EBIDTA).

Source : Equity Bulls

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