Indian Hotels (Q4 FY12)

India Infoline News Service | Mumbai |

Indian Hotels posted disappointing Q4 results as topline grew a subdued 5.5% yoy weighed down by weak demand

CMP Rs55, Target Rs59, Upside 7.3% 
  • Indian Hotels posted disappointing Q4 results as topline grew a subdued 5.5% yoy weighed down by weak demand; both ARRs and occupancy rates remain sluggish though F&B growth continues to be encouraging

  • EBIDTA margin was down 640bps yoy to 28.4% and is actually lower than the 30-35% range maintained for the busy season in H2 FY10/11; margin was also affected by higher staff costs and opex due to opening of Vivanta by Taj at Bangalore

  • PAT declined ~31% yoy on weak operating performance, higher tax rate and lower other income

  • Analyst meet highlights: 1) Mgmt remains committed to turn around of Pierre property in US and would look to bridge the US$200 gap in room rates that exists between Pierre and other comparable hotels in NY 2) focus would be on cost rationalization as a margin driver given that topline growth has remained sluggish 3) no fresh incremental debt for ongoing expansion and funding needs to be met from internal accruals-FY13 capex seen at Rs1bn for Taj Dwarka (owned property); overall company to add 18 hotels and ~2,000 rooms (some spill over from FY12) in 2012-13 with majority of additions either through mgmt contract or via JVs/subsidiaries; FY12 net debt stood at Rs35.7bn vs ~Rs34bn last year   

  • Given the weak demand scenario, we see little likelihood of buoyancy in ARRs or occupancies; international operations too remain hinged on performance of US operations especially that of Pierre; based on FY12 results, we lower our EBIDTA/PAT estimates for FY13/14 and retain Market Performer with revised 9-mth TP of Rs59 (earlier Rs69) 

Results table
(Rs m) Q4 FY12 Q4 FY11 % yoy FY12 % yoy
Net sales 5,602 5,309 5.5 34,327 19.9
License fees (431) (375) 14.9 (1,239) 12.8
Raw material (439) (387) 13.6 (3,626) 22.3
Personnel (1,199) (1,069) 12.2 (11,491) 19.3
Power & fuel (340) (277) 22.6 (2,424) 24.8
Other overheads (1,600) (1,352) 18.3 (10,091) 19.0
Operating profit 1,592 1,849 (13.9) 5,457 21.0
OPM (%) 28.4 34.8 (640) bps 15.9 15 bps
Depreciation (319) (280) 14.0 (2,551) 11.9
Interest (295) (265) 11.3 (1,934) (23.0)
Other income 99 156 (36.3) 508 28.4
PBT 1,077 1,459 (26.2) 1,480 1,210.0
Tax (414) (499) (17.2) (1,218) 32.2
Extra ordinary items (11) (21) (46.1) (5) -
Reported PAT 652 939 (30.6) 31 -
Source: Company, India Infoline Research
Note: figures for FY12 are consolidated 
 
Financial summary
Y/e 31 March (Rs m) FY11 FY12E FY13E FY14E
Revenues 28,625 34,327 37,952 42,506
yoy growth (%) 13.5 19.9 10.6 12.0
Operating profit 4,524 5,457 5,883 6,716
OPM (%) 15.8 15.9 15.5 15.8
Pre-exceptional PAT (671) 35 812 1,348
Reported PAT (873) 31 812 1,348
         
EPS (Rs) (1.1) - 1.0 1.7
P/BV (x) 1.5 1.5 1.5 1.4
EV/EBITDA (x) 18.3 14.8 13.5 11.4
Debt/Equity (x) 1.5 1.2 1.2 1.2
ROE (%) (2.6) 0.1 2.6 4.4
ROCE (%) 3.5 4.5 5.0 6.1
Source: Company, India Infoline Research 
 

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