EUR 120.00 For Business Accounts Only

MOSL: INDIAN HOTELS (Buy)-Consol. performance largely in line-Notable contribution by subsidiaries

INDIAN HOTELS: Consol. performance largely in line; Notable contribution by subsidiaries

(IH IN, Mkt Cap USD2.3b, CMP INR135, TP INR178, 32% Upside, Buy)

 

• revenue/EBITDA largely in-line…: Consol. revenue grew by 4% YoY to INR10.2b (our estimate: INR10.3m). Adjusting for Ind-AS 116 impact, like-to-like EBITDA was up 16% YoY at INR1,287m (our estimate: INR1,219m), with the margin expanding 130bp YoY to 12.6% (our estimate: 11.9%). Adj. PAT declined 82% YoY to INR34m (our estimate: INR154m) on account of lower profit at JVs/associates (INR45m v/s our estimate of INR96m) and higher tax (1QFY19 had a tax benefit).
• …mainly driven by UK/US hotels: Standalone revenue was up by only 1% YoY to INR5.7b, impacted by a 2.5% decline in RevPAR amid elections. However, like-to-like standalone EBITDA was up 4% YoY to INR881m. This indicates that the consol. performance (like-to-like) was primarily driven by subsidiaries (consol. less standalone), where revenue/EBITDA grew 8%/59% YoY to INR4.5b/INR406m. The performance of the US/UK subsidiaries was particularly impressive (RevPAR up 30% YoY in the UK).
• Key concall highlights: (i) IHIN signed seven hotels under management contracts in 1QFY20 (1,267 keys). (ii) ARR growth in the renovated Ginger property in Goa was at 30% YoY.
• Valuation and view: Factoring in the impact of Ind-AS 116 into our model, we raise our FY20/21 EBITDA estimate by 18%/14%, but cut the PBT estimate by 3%/4%. We value the stock at 17x FY21E EV/EBITDA. On an SOTP basis, we arrive at a TP of INR178 (upside of 32%). Maintain Buy.