MOSL: INDIAN HOTELS (Buy)-ARR growth despite lower occupancy drives performance
Indian Hotels: ARR growth despite lower occupancy drives performance; RevPAR growth guidance of 6% maintained
(IH IN, Mkt Cap USD2.6b, CMP INR154, TP INR186, 21% Upside, Buy)
- Consolidated revenue/EBITDA in line with estimates: Consolidated revenue increased 9% YoY to INR12.4b (our estimate: INR12.5b) in 4QFY19. EBITDA grew 16% YoY to INR2,843m (our estimate: INR2,857m), with the margin expanding 150bp YoY to 22.8% (our estimate: 22.8%). Adj. PAT increased 11% YoY to INR1,002m (our estimate: INR1,095m).
- FY19 performance: Consolidated revenue grew 10.1% YoY to INR45.1b. EBITDA increased 24% YoY to INR8,297m, with the margin improving 200bp YoY to 18.4%.
- Guidance of 6% RevPAR growth maintained: Standalone revenue increased 7% YoY to INR8,430m in 4QFY19, primarily with higher ARRs (up 7% YoY, despite a 200bp dip in the occupancy) driving EBITDA growth of 15% YoY to INR2,945m. Although the consolidated performance continued to be driven by growth at the standalone level, the 16%+ revenue growth at key subsidiaries (St James, Piem and US) in FY19 was noteworthy. Management maintained its RevPAR growth guidance of 6%.
- Key concall highlights: (i) IHIN targets to add 1,800-2,000 rooms in FY20, predominantly under the management contract route. (ii) Capex for standalone/consolidated businesses is guided at INR2.25-2.5b/INR3.5b.
Indian Hotels is primarily engaged in the business of hoteliering and air catering. Co. operates under the brand "Taj Hotels Resorts and Palaces"and runs the hotels under the brands "Taj", "Gateway" and "Ginger" hotels. As of Mar 31 2010, Taj Hotels Resorts and Palaces was comprised of 66 hotels in 42 locations across India with an additional 16 international hotels in the Maldives, Malaysia, Australia, U.K., U.S., Bhutan, Sri Lanka, Africa and the Middle East. Co. also operates Taj Sats Air Catering Ltd. as a joint venture with Singapore Airport Terminal Services, a subsidiary of Singapore Airlines. Additionally, Co. operates the Indian Institute of Hotel Management, Aurangabad.
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