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MOSL: INDIAN HOTELS (Buy)-Cost savings and operating leverage lower operating loss

INDIAN HOTELS: Cost savings and operating leverage lower operating loss

(IH IN, Mkt Cap USD2.3b, CMP INR143, TP INR183, 28% Upside, Buy)

 

• Despite the second COVID wave, standalone RevPAR nearly doubled as compared to last year due to ARR growth and occupancy improvement, as the impact this time around was less severe and the recovery was faster as compared to the first wave. Additionally, IHIN’s operating performance was strong on the back cost saving measures and operating leverage.
• Revenue/EBITDA in 1QFY22 was above our estimate. Factoring the same, we have increased our FY22E revenue/EBITDA estimate by 2%/4%, and have maintained our estimate for FY23E. We maintain our Buy rating on the stock, with a Sept’23E SoTP-based TP of INR183. 

RevPAR led recovery

• Consolidated revenue grew 140% YoY to INR3,446m (est. INR2,800m). On a QoQ basis, revenue declined by 44%. Operating loss reduced to INR1,488m v/s a loss of INR2,660 in 1QFY21 and our estimate of INR1,592m. It reported a net loss of INR2,926m v/s a loss of INR3,445m in 1QFY21.
• IHIN’s domestic network Hotels have outperformed the industry in all key cities in RevPAR recovery (as a percentage of LY).
• Standalone revenue grew 118% YoY (-55% QoQ) to INR2,074m, led by an 101% improvement in RevPAR. The growth was due to 7.9pp improvement in occupancy (to 28.2%) and ARR growth of 45% YoY (to INR7,024). Operating loss stood at INR965m v/s an operating loss of INR1,619m in 1QFY21. EBITDA stood at INR1,047m in 4QFY21.