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MOSL: INDIAN HOTELS (Buy)-Decent performance amidst weak environment

Indian Hotels: Decent performance amidst weak environment

(IH IN, Mkt Cap USD2.4b, CMP INR147, TP INR172, 17% Upside, Buy)

 

• In-line consolidated revenue and EBITDA: Consolidated revenue grew 4% YoY to INR10.1b (v/s est. INR10.1b). Adjusting for Ind-AS116 impact, EBITDA grew 16% YoY to INR1,153m. Like-to-like EBITDA margins expanded 120bp YoY to 11.4% due to operating leverage and cost rationalization measures. Reported PBT loss was at INR52m in 2QFY20 v/s loss of INR120m in 2QFY19. Adj. PAT stood at INR716m (v/s est. INR315m), up 1.8x YoY on account of deferred tax benefit. For 1HFY19, revenue/EBITDA (like-to-like)/ PAT grew 4%/16%/27%.
• Occupancy drives RevPAR growth in standalone business: Standalone revenue grew 5% YoY to INR6b in 2QFY20 on the back of 430bp YoY improvement in occupancy to 68.2%. However, ARR declined 4.5% YoY and contained RevPAR growth to 1.7%. Like-to-like standalone EBITDA grew 12% YoY to INR994m. Subsidiaries (consol. less standalone) drove the consolidated performance (like-to-like) wherein revenue/EBITDA grew 4%/59% YoY to INR4.1b/INR159m. Subsidiary performance during the quarter was driven by the US (cash losses reduced by INR40m) and St James.
• Key concall highlights: (a) Consolidated net debt stood at INR2,045m as at Sep'19 v/s INR1,925m in Mar'19; company remains confident of maintaining its net debt position at the year end. (b) IHIN plans to start 8 hotels in 2HFY20 under management contract. (c) According to IHIN, resistance to rate hike by corporates is lower post the GST rate cut.