East India Hotels (EIH)

Result Update
January 31, 2014
East India Hotels (EIH)
Rating matrix
Rating
:
Hold
Target
:
| 60
Target Period
:
12 months
Potential Upside
:
7%
| 56
WHAT’S CHANGED…
PRICE TARGET....................................................................................................Unchanged
Key Financials
(| Crore)
Net Sales
EBITDA
Net Profit
EPS
FY12
1407.2
315.8
122.3
2.0
FY13
1468.5
277.7
41.8
1.1
FY14E
1556.6
320.3
93.6
1.6
FY15E
1678.0
368.4
120.7
2.1
Valuation summary
FY12
26.2
30.5
11.0
1.2
4.7
6.1
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY13
76.5
57.8
13.5
1.2
1.6
4.1
FY14E
34.2
37.2
11.6
1.2
3.6
5.0
FY15E
26.5
28.9
9.5
1.2
4.4
6.2
Stock data
Market Capitalisation
Debt
Cash
EV
52 week H/L
Equity capital
Face value (| per share)
MF Holding (%)
FII Holding (%)
| 3,201 Cr
| 718 Cr
| 162 Cr
| 3,756 Cr
91/54
| 114 Cr
2.0
12.8
2.0
Price movement
6,500
80
6,000
70
5,500
60
5,000
50
4,500
4,000
Feb-13
40
May-13
Aug-13
Price (R.H.S)
Nov-13
Jan-14
Nifty (L.H.S)
Analyst’s name
Rashesh Shah
[email protected]
Darpan Thakkar
[email protected]
EPS (FY14E)........................................................................................................Unchanged
EPS (FY15E)....................................................................................................... Unchanged
RATING...............................................................................................................Unchanged
Meets expectation…
East India Hotels’ (EIH) Q3FY14 results were in line with our estimates with
the company reporting revenue of | 348.6 crore vs. I-direct estimate of
| 350.9 crore (up 9.5% YoY). The revenue growth, we believe, was led by
an improvement in foreign tourist arrivals (FTA), which reported growth of
4.8% YoY as well as increased domestic demand. Higher revenue also
helped to improve margins, which are up 40 bps YoY to 28.4%. Due to
better operating leverage, net profit exhibited healthy growth of 25.2%
YoY at | 41 crore (vs. I-direct estimate: 39.7 crore)
Peak season drives domestic growth; FTA shows some improvement
Increase in domestic tourists due to holiday season along with
improvement in FTA growth rate at 4.8% YoY for the quarter resulted in
revenue increase by 9.5% YoY. Among major operating regions, ARRs in
Agra and Goa showed double digit growth compared to last year while
business destinations like Mumbai and Delhi witnessed flattish trend in
ARRs vs. last year.
Improvement in margin led by better cost control management
In Q3FY14, better growth in topline and cost control measures led to an
expansion in margins. It increased 40 bps YoY to 28.4% (vs. I-direct
estimate: 27.5%). Among cost components, employee cost declined 2%
QoQ (up 10% YoY) while other cost increased moderately by 6.4% YoY to
| 115.8 crore.
Yet to see transition; maintain HOLD rating
The Q3FY14 performance reflected an improvement in performance
despite a subdued business environment. However, we expect RevPAR
growth to remain muted during our forecast period as the sector is yet to
witness a transition from occupancy led cycle to the recovery in room
rates. We expect revenue CAGR of 5.7% for FY13-15E. Hence, we remain
conservative and value the stock at 10.0x FY15E EV/EBITDA (i.e. 10%
discount to two-year forward average multiple) with target price of | 60
and a HOLD rating.
Exhibit 1: Financial Summary
(| crore)
Net Sales
EBITDA
EBITDA Margin (%)
Depreciation
Interest
Net Profit
EPS (|)
Q3FY14
348.6
99.1
28.4
24.7
10.8
41.0
0.7
Q3FY14E
350.9
95.1
27.5
25.1
11.5
39.7
0.7
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Q3FY13
318.4
89.3
28.0
26.7
13.7
32.8
0.6
Q2FY14
261.0
28.8
11.0
24.6
11.1
7.0
0.1
YoY Gr. (%)
9.5
11.0
+40 bps
-7.4
-21.0
25.2
25.2
QoQ Gr. (%)
33.6
244.5
+1740 bps
0.6
-2.3
483.5
483.5
800
718
12
589
10
8
436
525
474
444
384
452
640
688
753
701
556
446
412
525
432
452
372
6
4
2
0
FTA (LHS)
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
-2
Jun-12
900
800
700
600
500
400
300
200
100
0
Apr-12
('000)
FTA grew 4.8% for the quarter ending December 2013
compared to 3.2% during previous quarter
699
Exhibit 2: Trends in foreign tourist arrivals (FTAs)
YoY Gr (%) (RHS)
Source: MoT, ICICIdirect.com Research
Exhibit 3: Industry occupancy trend across main operating regions of EIH
85
Average
occupancy
level
across
both
75
business
destinations (Delhi, Bangalore and Mumbai) and leisure
65
61
55
%
destinations improved marginally due to moderate growth
in demand
55
76
73
68
66
75
82
78
73
76
73
69
70
68
64
66
64
68
61
59
62
57
56
46
50
45
57
73
53
49
Sep-13
Oct-13
Nov-13
7572
4738
8350
6513
8590
7350
Sep-13
Oct-13
Nov-13
Aug-13
7310
4775
Aug-13
Jul-13
7350
4775
Jul-13
Jun-13
7190
4863
Jun-13
May-13
7370
4863
Business destinations*
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
35
Leisure destinations**
* Includes Delhi, Bangalore, Kolkata, Mumbai. **Includes Jaipur, Agra, Kochi, Goa
Source: Industry Reports, ICICIdirect.com Research
8910
7313
8840
7188
8520
7938
8930
7263
8350
6925
7950
6025
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
Sep-12
stagnant. ARR in leisure destinations increased due to
festive season
Oct-12
(such as Mumbai, Delhi and Bangalore) remained
8528
6563
During Q3FY14, the ARR across business destinations
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
6990
4569
Exhibit 4: Industry ARR trends across company’s main operating regions
Business destinations*
leisure destinations**
* Includes Delhi, Bangalore, Kolkata, Mumbai. **Includes Jaipur, Agra, Kochi, Goa
Source: Industry Reports, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 2
Exhibit 5: Quarterly trends in sales and net profit
400
Standalone revenues grew 9.5% YoY led by increased
350
domestic demand and moderate growth in FTA. The
300
company reported net profit of | 41.0 crore (in line with
our estimates due to a good operating performance)
| crore
250
324
313
237
217
349
343
318
267
231
261
200
150
100
50
45
17
45
9
-18
33
27
11
17
7
0
-50
Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14
Sales
Net Profit
Source: Company, ICICIdirect.com Research
Exhibit 6: Trends in operating margins
35
31.9
30
EBITDA margins improved YoY due to lower operating
cost. Margin improvement QoQ was led by lower
employee cost
27.6
27.2
25
27.5
(%)
20
15
21.5
17.2
12.4
15.0
10
11.0
5
0
-5
0.8
Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14
Source: Company, ICICIdirect.com Research
Room supply growth outpaces demand growth
While room demand is growing at a steady rate of 5-6% YoY, room supply
is rising at 8-9% YoY, leading to pressure on occupancy and room rates.
However, EIH being strategically placed in terms of locations, we expect
EIH to remain least affected by current slowdown in the industry.
The Q3FY14 performance reflected an improvement in performance
despite a subdued business environment. However, we expect RevPAR
growth to remain muted during our forecast period as the sector is yet to
witness a transition from occupancy led cycle to the recovery in room
rates. We expect revenue CAGR of 6.0% for FY13-15E. Hence, we remain
conservative and value the stock at 10.0x FY15E EV/EBITDA (i.e. 10%
discount to two-year forward average multiple) with a target price of | 60
and a HOLD rating.
Exhibit 7: Valuation matrix
Year
FY12
FY13
FY14E
FY15E
Sales (|.cr)
1407.2
1468.5
1543.4
1663.8
Sales Gr.
(%)
24.0
4.4
5.1
7.8
EPS (|) EPS Gr. (%) EV/EBITDA
2.1
0.7
1.6
2.1
LP
-65.8
114.1
32.6
10.6
13.1
11.5
9.3
P/E
RoCE (%)
RoNM(%)
25.2
73.8
34.5
26.0
6.1
4.1
4.8
6.1
4.7
1.6
3.4
4.4
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 3
Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
Raw Material Expenses
Employee Expenses
Other Exp
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
Others
Total Tax
PAT
Growth (%)
EPS (|)
Cash flow statement
FY12
1,407.2
24.9
182
368
541
1,091.4
315.8
4.8
129.8
70.4
42.0
157.7
-12.7
48.04
122.3
LP
2.1
FY13
1,468.5
4.4
195
392
604
1,190.8
277.7
-12.1
141.1
71.7
36.1
101.0
21.0
27.1
41.8
-65.8
0.7
FY14E
1,556.6
6.0
203
414
619
1,236.3
320.3
15.4
152.3
59.9
36.4
144.6
5.7
45.3
93.6
123.7
1.6
(| Crore)
FY15E
1,678.0
7.8
219
436
654
1,309.6
368.4
15.0
165.4
56.6
36.8
183.2
2.1
60.4
120.7
28.9
2.1
Source: Company, ICICIdirect.com Research
(Year-end March)
Profit after Tax
Add: Depreciation
(Inc)/dec in Current Assets
Inc/(dec) in CL and Provisions
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in Fixed Assets
Others
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Dividend paid & dividend tax
Inc/(dec) in Sec. premium
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash
FY13
41.8
141.1
-88.4
-61.2
33.4
1.0
-163.0
-2.6
-164.6
0.0
318.1
-60.5
0.0
22.3
279.9
26.4
125.2
151.6
FY14E
93.6
152.3
-42.7
104.6
307.8
-8.7
-200.0
13.4
-195.2
0.0
-25.0
-60.5
0.0
-17.5
-103.1
9.5
151.6
161.1
(| Crore)
FY15E
120.7
165.4
-18.8
38.5
305.7
-5.0
-100.0
9.8
-95.2
0.0
-200.0
-60.5
0.0
50.0
-210.5
0.0
161.1
161.1
FY12
FY13
FY14E
FY15E
2.1
4.4
45.3
0.0
2.2
0.7
3.2
45.4
0.9
2.7
1.6
4.3
45.7
0.9
2.8
2.1
5.0
47.6
0.9
2.8
23.4
-0.4
-0.5
11.4
43.9
92.0
22.4
8.7
8.7
11.0
51.1
75.2
18.9
2.8
2.8
11.0
45.0
90.0
20.6
6.0
6.0
11.0
45.0
90.0
4.7
6.1
4.7
1.6
4.1
3.0
3.6
5.0
3.8
4.4
6.2
4.6
26.2
11.0
2.5
2.3
1.2
76.5
13.5
2.6
2.2
1.2
34.2
11.6
2.4
2.1
1.2
26.5
9.5
2.1
1.9
1.2
1.3
0.2
1.3
1.0
2.6
0.3
1.8
1.4
2.2
0.3
1.5
1.2
1.3
0.2
1.4
1.1
FY12
122.3
129.8
-35.2
84.2
301.1
104.7
-167.9
16.1
-47.1
0.0
-668.8
0.0
0.0
-77.4
-746.3
-560.9
686.0
125.2
Source: Company, ICICIdirect.com Research
Balance sheet
(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Minority Interest / Others
Total Liabilities
Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Goodwill on consolidation
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Creditors
Provisions
Total Current Liabilities
Net Current Assets
Others Assets
Application of Funds
Key ratios
FY12
FY13P
FY14E
(| Crore)
FY15E
114.3
2,477.3
2,591.7
399.5
168.8
97.6
3,257.5
114.3
2,481.0
2,595.3
717.6
170.1
54.8
3,537.7
114.3
2,496.5
2,610.8
692.6
170.1
68.2
3,541.7
114.3
2,606.6
2,720.9
492.6
170.1
78.0
3,461.6
3,195.0
827.2
2,367.8
316.2
2,683.9
308.9
116.4
43.6
169.1
236.9
2.4
125.2
577.1
354.6
95.3
449.9
127.3
0.0
3,257.5
3,195.0
828.4
2,366.6
339.2
2,705.8
326.4
136.8
45.0
205.4
285.9
4.0
151.6
691.9
302.5
86.2
388.7
303.2
0.0
3,537.7
3,575.0
980.7
2,594.3
159.2
2,753.5
326.4
201.6
48.8
191.9
336.8
5.6
161.1
744.1
383.8
109.4
493.3
250.8
0.0
3,541.7
3,775.0
1,146.1
2,628.9
59.2
2,688.1
326.4
210.3
52.3
206.9
334.4
8.1
161.1
762.9
413.8
118.0
531.7
231.1
0.0
3,461.6
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios (%)
EBITDA Margin
PBT / Total Operating income
PAT Margin
Inventory days
Debtor days
Creditor days
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio
Source: Company, ICICIdirect.com Research
Page 4
Company Description
EIH Ltd is an India-based company with hotels owned and managed by the
company including The Oberoi, Mumbai, The Oberoi Udaivilas, Udaipur;
The Oberoi, New Delhi, The Oberoi Vanyavilas, Ranthambhore, The
Oberoi, Bangalore, Trident, Nariman Point, Mumbai, The Oberoi Grand,
Kolkata, Trident, Bandra Kurla, Mumbai, The Oberoi, Gurgaon and Trident,
Gurgaon. The company operates in two segments: hotel and others. The
company's subsidiaries include Mercury Car Rentals Ltd, Mashobra Resort
Ltd, Oberoi Kerala Hotels and Resorts Ltd, Mumtaz Hotels Ltd, EIH Flight
Services Ltd, EIH International Ltd, EIH Holdings Ltd, EIH Marrakech Ltd,
J&W Hong Kong Ltd and PT Astina Graha Ubud.
Exhibit 8: Recommendation History
120
100
80
60
40
20
0
Feb-13
Mar-13
May-13
Jun-13
Price
Aug-13
Sep-13
Nov-13
Dec-13
Jan-14
Target Price
Source: Company, ICICIdirect.com Research
Exhibit 9: Recent Releases
Date
2-Nov-12
31-Jan-13
3-Jun-13
5-Jul-13
6-Aug-13
7-Oct-13
3-Jun-13
Event
Q2FY13 Result Update
Q3FY13 Result Update
Q4FY13 Result Update
Q1FY14 Result Preview
Q1FY14 Result Update
Q2FY14 Result Preview
Q2FY14 Result Update
CMP
75
70
56
53
44
55
55
Target Price
85
77
61
61
48
48
60
Rating
HOLD
HOLD
HOLD
HOLD
HOLD
HOLD
HOLD
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 5
ICICIdirect.com Coverage Universe (Hotels)
Sector/Company
Indian Hotel (IHCL)
EIH (EIH)
Hotel Leela (HOTLEE)
TajGVK Hotels (TAJGVK)
CMP
(|)
58
56
15
59
TP(|) Rating
45 HOLD
60 HOLD
12.5 SELL
60 HOLD
M Cap
EPS (|)
(| Cr) FY13 FY14E FY15E
3876 -5.3 -4.6
0.7
3201
0.7
1.6
2.1
607 -10.4 -9.7 -7.6
345
1.4
0.4
1.5
P/E (X)
FY13 FY14E FY15E
NA
NA 65.628
76.5
34.2
26.5
NM
NM
NM
42.1 140.6
39.1
EV/EBITDA (X)
FY13 FY14E FY15E
13.7
13.4
11.7
13.5
11.6
9.5
48.9
36.8
36.9
8.8
9.5
8.2
RoCE (%)
FY13 FY14E FY15E
3.3
3.0
3.7
4.1
5.0
6.2
-0.4
0.2
0.3
6.8
5.6
7.4
RoE (%)
FY13 FY14E FY15E
NA -13.8
2.1
1.6
3.6
4.4
NA
NA
NA
2.5
0.8
2.8
Source: ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 6
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: > 10%/ 15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
[email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]
ANALYST CERTIFICATION
We /I, Rashesh Shah CA, Darpan Thakkar MBA, research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures:
ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading
underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of
companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities
generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts
cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and
employees (“ICICI Securities and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities
from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities
policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received
compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment
banking or other advisory services in a merger or specific transaction. It is confirmed that Rashesh Shah CA Darpan Thakkar MBA research analysts and the authors of this report have not received any
compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings
from Investment Banking and other business.
ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the
research report.
It is confirmed that Rashesh Shah CA Darpan Thakkar MBA research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member
of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use
of information contained in the report prior to the publication thereof.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.
ICICI Securities Ltd | Retail Equity Research
Page 7

Download Report