EUR 120.00 For Business Accounts Only

MOSL: INDIAN HOTELS (Buy)-Good quarter in a challenging environment

Indian Hotels: Good quarter in a challenging environment

(IH IN, Mkt Cap USD2.4b, CMP INR142, TP INR190, 34% Upside, Buy)

 

• IHIN's 3QFY20 performance was driven by standalone operations, wherein revenue/like-to-like (L2L) EBITDA (adjusted for Ind-AS) grew 6%/13%, which in our view is healthy. The industry RevPAR growth is again back on track (+5.5%) after dipping in 1QFY20 (+1.9%) owing to elections.
• Revenue/EBITDA was in line during the quarter, however, the 32% PAT beat led to an increase in PAT estimates by 12% for FY20. 

Operation performance in-line; other income and tax drives sharp PAT beat

• Consolidated revenue grew 4% YoY to INR13.7b (v/s est. INR13.9b) with L2L EBITDA growing 13% YoY to INR3.8b. Lower tax rate and higher other income (up 2.5x YoY to INR362m, of which INR297m pertains to sale of residential flats) drove 69% YoY growth in PAT to INR2b (v/s est. INR1.5b). For 9MFY20, revenue/L2L EBITDA/adj. PAT grew 4%/14%/55%.
• In the standalone, revenue/L2L EBITDA grew 6%/13% YoY to INR8.5b/INR3b on the back of 5.6% growth in RevPAR for IHIN's network hotels (v/s 5.5% industry RevPAR growth). Network hotels of IHIN in key cities have witnessed higher RevPAR growth: Mumbai (+8%), New Delhi (+7%), Chennai (+10%), Hyderabad (+9%) and Bangalore (+10%). In 3QFY20, room revenue/F&B for domestic network hotels grew 11%/7% YoY.
• Subsidiary (consolidated less standalone) sales declined 1% YoY whereas L2L EBITDA grew 13% YoY; although the performance improved across the board, particularly St. James and Roots Corporation did well.